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Europe: the uneven recovery*

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.

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Europe: the uneven recovery*

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  1. 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

  2. Plan of the Presentation • Convergence-divergence in Europe, 1994-2007 • The boom years, 2003-2007 • The slowdown (recession), 2008-2009 • The recovery, 2010-2011 • Some final observations Two groups of countries considered: • Developed Europe (DE) • Emerging Europe (EE)

  3. 1.Convergence - divergence in Europe, 1994-2007

  4. Figure 1. GDP growth in Europe: 1994-2007, 2008-2009, 2010-2011

  5. Figure 2. Economic growth in Europe,1994-2007

  6. 2. The boom years, 2003-2007

  7. Figure 3. GDP growth, 2003-2007

  8. Table 1. Public spending /GDP Source: IMF WEO IX 2011

  9. Table 2. Fiscal deficit (surplus)/GDP Source: IMF WEO IX 2011

  10. Table 3. Public debt /GDP Source: IMF WEO IX 2011

  11. Table 4. Current account deficit (surplus)/GDP Source: IMF WEO IX 2011

  12. Table 5. Domestic credit to the private sector /GDP Source: WB WDI online

  13. Figure 4. Unit Labor Costs in Manufacturing

  14. 3.The slowdown (recession),2008-2009

  15. Figure 5. GDP growth in Europe, 2008-2009

  16. 4.The recovery, 2010-2011

  17. Figure 6. GDP growth in Europe 2008-2009 and 2010-2011

  18. Figure 7. Unemployment in Europe 2008-2009 and 2010-2011

  19. Figure 8. Inflation in Europe 2008-2009 and 2010-2011

  20. Figure 9. Harmonized long-term interest rates, Sept. 2009, 2010 and 2011

  21. Figure 10. Unit Labour Costs in Manufacturing

  22. Figure 11. GDP growth: PIIGS vs. BLLE (Bulgaria, Lithuania, Latvia, Estonia)

  23. Figure 12. ULC in Manufacturing: Greece, Italy and Spain* vs. BLLE

  24. Figure 13. Public debt: PIIGS vs. BLLE

  25. Figure 14. Fiscal deficit: PIIGS vs. BLLE

  26. Figure 15. Public spending: PIIGS vs. BLLE

  27. Figure 16. Current account: PIIGS vs. BLLE

  28. 5. Some final observations

  29. Large variation in both DE and EE regarding all key aspects of the economic performance: Europe defies easy generalizations! • Most countries (both DE and EE) which experienced growth problems during 2008-2011 registered huge fiscal and/or private sector’s credit booms, as well as large increases in ULC in manufacturing, during 2000-2007

  30. 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)

  31. 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.

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