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European Integration in a Global Economy

European Integration in a Global Economy

CESEE and the Impact of China and Russia

Edited by Ewald Nowotny, Peter Mooslechner and Doris Ritzberger-Grünwald

The expert contributors focus on global imbalances and accompanying policy challenges, competitiveness and trade, the sustainability of current growth strategies, and banking and financial stability in the light of the global economic and financial crisis. They provide a multi-disciplinary assessment, combining the views of high-ranking central bankers, policymakers, commercial bankers and academics, and demonstrate that a broad view of European economic integration is crucial given that spillovers and contagion were major issues of the recent economic crisis.

Chapter 14: Short- term outlook and long- term convergence in China, Russia and Eastern Europe

Jean- Luc Schneider

Subjects: economics and finance, international economics, money and banking


This chapter presents the author’s views as of late November 2011 on how global economic developments may affect growth in the short term and, in the longer term, the growth strategy in China, Russia and the Eastern European countries, a rather heterogeneous group of countries that for ease of reference will be called ‘transition countries’ in what follows. Forecasting economic developments is especially difficult in times of high uncertainty. The volatility observed in equity and bond markets since the summer of 2011 is exceptional and reflects a situation seen by market participants as prone to accidents. Concerns about possible accidents relate mostly to the euro area, where they range from the disorderly default of sovereign borrowers, to the contagion of sovereign debt stress to core countries, to tensions and disruptions in the financial sector, and perhaps even to the break-up of the currency area. But not all possible negative events are located in the euro area, as concerns have also emerged about a political deadlock in the USA over fiscal policy, or about the possible hard landing of some large emerging economies and associated risks to their financial sectors. Given the exceptional level and range of uncertainty, the only way to make quantitative projections at this juncture is to assume that none of these negative events occurs. Thus the OECD has constructed a baseline scenario that may not be the most likely but that is workable, and that assumes that business and consumer confidence worsens in late 2011/early 2012, before recovering only very gradually, as economic agents observe that none of the risks initially envisaged has materialized.

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