Download 1.Introduction - Hoover Institution

Europe: the uneven recovery*
Leszek Balcerowicz
Warsaw School of Economics
Visiting fellow at The Hoover Institution
Hoover Presentation, October 14, 20011
*in preparing this presentation I was assisted by Aleksander Łaszek
Plan of the Presentation
1. Convergence-divergence in Europe, 1994-2007
2. The boom years, 2003-2007
3. The slowdown (recession), 2008-2009
4. The recovery, 2010-2011
5. Some final observations
Two groups of countries considered:
• Developed Europe (DE)
• Emerging Europe (EE)
1. Convergence - divergence in Europe,
1994-2007
Figure 1.
GDP growth in Europe: 1994-2007, 2008-2009, 2010-2011
4
Figure 2. Economic growth in Europe,1994-2007
2. The boom years, 2003-2007
Figure 3. GDP growth, 2003-2007
Table 1. Public spending /GDP
Source: IMF WEO IX 2011
Table 2. Fiscal deficit (surplus)/GDP
Source: IMF WEO IX 2011
Table 3. Public debt /GDP
Source: IMF WEO IX 2011
Table 4. Current account deficit (surplus)/GDP
Source: IMF WEO IX 2011
Table 5. Domestic credit to the private sector /GDP
Source: WB WDI online
Figure 4. Unit Labor Costs in Manufacturing
3. The slowdown (recession), 2008-2009
Figure 5. GDP growth in Europe, 2008-2009
4. The recovery, 2010-2011
Figure 6. GDP growth in Europe 2008-2009 and 2010-2011
Figure 7. Unemployment in Europe 2008-2009 and 2010-2011
Figure 8. Inflation in Europe 2008-2009 and 2010-2011
Figure 9. Harmonized long-term interest rates, Sept. 2009, 2010
and 2011
Figure 10. Unit Labour Costs in Manufacturing
Figure 11. GDP growth: PIIGS vs. BLLE (Bulgaria, Lithuania, Latvia, Estonia)
Figure 12. ULC in Manufacturing: Greece, Italy and Spain* vs. BLLE
Figure 13. Public debt: PIIGS vs. BLLE
Figure 14. Fiscal deficit: PIIGS vs. BLLE
Figure 15. Public spending: PIIGS vs. BLLE
Figure 16. Current account: PIIGS vs. BLLE
5. Some final observations
1. Large variation in both DE and EE regarding
all key aspects of the economic
performance: Europe defies easy
generalizations!
2. Most countries (both DE and EE) which
experienced growth problems during 20082011 registered huge fiscal and/or private
sector’s credit booms, as well as large
increases in ULC in manufacturing, during
2000-2007
3. The recession 2008-2009 was accompanied
by the increases in fiscal deficits. However, the
size of these increase was not strictly related
to the magnitude of the recession.
4. The unemployment in DE in 2008-2011,
displayed very different dynamics, which was
not strictly related to that of GDP
5. Despite recession there was no sign of
deflation and recovery has been accompanied
by the accerelation of inflation in DE (not so
much in EE)
6. BLLE have on average adjusted much better
than PIIGS. Within PIIGS Ireland and Spain
have performed so far much better than
Greece and Portugal.
7. The example of BLLE and Ireland shows that
countries can adjust via internal devaluation
even after huge shocks.