The Role of CESEE Countries
Edited by Marek Belka, Ewald Nowotny, Pawel Samecki and Doris Ritzberger-Grünwald
Chapter 1: Boosting European competitiveness
The topic of competitiveness is more relevant today than ever, for a number of reasons. First, in the years prior to the crisis that emerged in 2008, macroeconomic imbalances built up in several euro area countries. When the crisis erupted, these imbalances aggravated the depth of the recessions and laid bare flaws of the institutional architecture of the monetary union. This raised also the awareness of addressing the underlying competitiveness gaps. Today, competitiveness plays a critical role in returning to a sustainable growth path. In this specific context, ‘boosting European competitiveness’ refers to the short-term policies necessary to restore a sound mix of strong domestic demand and a high level of external competitiveness. The second, medium-term challenge is to advance the European integration process so that past experience of diverging economic developments and unbalanced growth models does not repeat itself. ‘Boosting European competitiveness’ in this context implies the deepening of monetary union, which may involve aspects of economic, fiscal and capital markets union. Given the special role of the banking system in absorbing shocks and in transmitting monetary policy to the economy, the completion of the banking union also plays a crucial role in this respect. While competitiveness is largely a challenge for national policymakers, European policies can and need to deliver their contributions to this overall aim. These policies must also include strong preventive and correcting mechanisms in response to unbalanced growth models. After all, national imbalances threaten the competitive position of the entire region.