It is argued that European integration has not fulfilled its chief economic promises. Output growth has been increasingly weak and unstable. Productivity growth has been following a decreasing trend. Income inequalities, both within and between the EU member states, have been rising. This sorry state of affairs is likely to continue — and likely to precipitate further exits, or eventually, the dissolution of the Union. However, this outcome is not unavoidable. A better integration in the EU is possible, at least in theory. Also, the negative consequences implicit in the existence of the common currency could be neutralised. However, the basic paradigms of the economic policies to be followed in the EU would have to be radically changed. First, the unconditional fiscal consolidation provisions still in force would have to be repelled. Second, “beggar-thy-neighbour” (or mercantilist) wage policies would have to be “outlawed”.
This paper examines the impact of EU enlargement and the global economic crisis on the relative development of the EU countries. This effect is assessed by applying multivariate analysis to the whole set of 28 European countries at three representative points in time. The cluster analysis for the years 2002, 2007, and 2012 grouped the countries according to the range of economic development indicators showing within-EU cohesion before the EU enlargement, after the enlargement wave, and after the crisis. The findings show that a decrease in the development differences after the enlargement was replaced with an increase in these differences after the crisis, thus contributing to the existing debate about the success of cohesion and future of European integration. These results are somewhat worrying for the new member states of the EU as well as for EU membership candidates and their prospective development within the integration.
It is argued that increased freedom to run economic activities combined with the growing impotence of national governments (i.e., globalization) have contributed to the secular growth slowdown at the global level. Fast globalisation-driven growth of international trade has unleashed the global race for economic surpluses. The process involves the suppression of wages and widening income inequalities – restricting aggregate demand globally. A “beggar-thy-neighbor” tactics of keeping large trade surpluses by countries successfully suppressing wages and domestic demand is likely to be unproductive. Overcoming the secular stagnation may not be possible without safeguarding equilibrium (or balance) in international transactions between major industrial countries – even if this may necessitate that in most (or all) of them the public sectors run large fiscal deficits permanently.
The Central and Eastern European new Member States of the European Union (CEECs) went through the transition process following the commandments of the Washington Consensus, which gradually evolved into the “integrative growth model”. External liberalisation exposed the CEECs to recurring problems over external imbalances, bubbles driven by capital inflows, and resulting growth instabilities. Large foreign direct investment inflows attracted by repressed wages and low taxes do not accelerate growth. Arguably, real convergence would be much faster under a system with built-in limitations to free trade, free capital movements – and with more scope for traditional industrial, trade, incomes, and fiscal policies.
The study analyses the impacts of the financial and economic crisis on potential growth in the European Union. It identifies the main channels of impact mechanism and carries out quantitative estimations in order to reveal the medium and long-term trends. According to over findings the impacts of the crisis are significantly different in the main country-groups of the EU. The basic structural problem of the EU is considered the decreasing trend in potential growth which might be further strengthened through the lasting consequences of the crisis.
This paper evaluates income convergence in the European Union, between “old” (EU15) and “new” member states from Central and East Europe (CEE10), and among the countries within these two groups. The GDP per capita convergence should be expected according to the exogenous economic growth model and neoclassical trade theory. The presence of σ-convergence and both absolute and conditional β-convergence is tested for on a sample of 25 European Union countries (EU25). Results confirm the existence of β-convergence of GDP per capita at purchasing power parity among EU25, but not among EU15 and CEE10 countries. σ-convergence has been confirmed among EU25 and CEE10 countries, while GDP per capita has been diverging in the EU15 group of countries. Moreover, the results reveal that recent economic crisis has reversed long-term tendencies and led to income convergence within EU15 and divergence within CEE10. During the crisis, the income differences among the EU25 countries have increased, but the scope and duration of this effect has been limited and has not affected the long term convergence path. However, the obtained long term speed of convergence is significantly lower compared with the previous researches.
This paper focuses on the roots of strain in the European Monetary Union (EMU). It argues that there is need for a thorough reform of the EU governance structure in conjunction with radical changes in the regulation and supervision of financial markets. The EMU was sub-optimal from its debut and competitiveness gaps did not diminish against the backdrop of its inadequate policy and institutional design. The euro zone crisis is not related to fiscal negligence only; over-borrowing by the private sector and poor lending by banks, as well as a one-sided monetary policy also explain this debacle. The EMU needs to complement its common monetary policy with solid fiscal/budget underpinnings. Fiscal rules and sanctions are necessary, but not sufficient. A common treasury (a federal budget) is needed in order to help the EMU absorb shocks and forestall confidence crises. A joint system of regulation and supervision of financial markets should operate. Emergency measures have to be comprehensive and acknowledge the necessity of a lender of last resort; they have to combat vicious circles. Structural reforms and EMU level policies are needed to enhance competitiveness in various countries and foster convergence.
This paper investigates the relationship between industrial restructuring and regional unemployment in Poland. Poland’s regional unemployment broke out of nothing at the beginning of the 1990s decade. Since then, it has remained remarkably unchanged over the decade for a variety of factors, such as the gradual restructuring process, labour supply rigidities and technological differences. The role of each of these factors is assessed within the framework of hazard functions applied to the inflow to unemployment from a job, computed using Polish Labour Force Survey data. When voivodships are grouped according to their unemployment rate it can be seen that low unemployment voivodships form a heterogeneous group, including both rural and urban areas. Applying a new method of analysis of the labour market effects of trade integration, the paper reveals circumstantial evidence on how Poland’s international comparative advantages in labour-intensive manufacturing combine with the economic advantages of urbanised regions to play a significant role in shaping the regional distribution of Poland’s unemployment.
The global automotive industry has been exposed to an overproduction crisis for several decades. Under the pressure of restructuring, automotive companies renew both the geographical scope and the technological standardization of their production processes. We analyze the effects this restructuring had on the development of European economies in order to understand whether vertical specializations in the automotive value chain can lead to Central and Eastern European countries’ catching up to advanced economies, or whether such specializations reproduce new forms of core-periphery relations. In order to answer this question, we introduce a new methodological approach to understand vertical specialization in the global value chain from a semi-peripheral perspective. We combine the theory of global value chains with Vernon's product life-cycle theory. In the research we focus on the standardization of the production of electric engines behind the geographical relocation of production between core and periphery.
Is Europe becoming the world’s leading knowledge-based economic area of the world, as European leaders planned at their Lisbon meeting in 2000? In this article, we analyze the Lisbon performance of the countries of the European Union from a long-term, structural perspective. We examine performance in the Lisbon indicators by factor analytical means. To measure progress, we observe contradictions between some of the indicators, chosen by the member governments and the European Commission. Finally, we conclude that only a Schumpeterian vision of capitalism as a process of “creative destruction,” or rather “destructive creation,” can explain these contradictions, which we empirically reveal in this analysis, and which beset the “Lisbon strategy” from the very beginning. European decision-makers often seem to be unaware of these underlying contradictions, which is why the goal of our paper is to clarify the processes involved. In Schumpeter’s elitist-conservative visions of society, the decay of values in the capitalist society was an all-important element in his pessimistic theory developed in “Capitalism, Socialism, and Democracy”. For Schumpeter the disappearance of the enterprising, male-dominated capitalist family was a critical element in his theory. But it is not the disappearance of the enterprising capitalist family that threatens the future of capitalism in Europe, but the often still existing incompatibility of work and family life, which explains more than 60% of the Lisbon process failure.