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Structural Challenges for Europe

Edited by Gertrude Tumpel-Gugerell and Peter Mooslechner

The main thrust of the book is that the sharing of mutual experiences is important for generating an acceptable policy mix, both at EU and national levels. The contributors highlight key financial issues, including the role of FDI and of foreign banks in the still ‘under-banked’ acceding countries, the re-launch of social security systems and the fiscal challenges of financing the catch-up process. They also examine the ongoing EU debate surrounding the application of the Stability and Growth Pact in Central and Eastern European Countries (CEECs) and go on to explore the contrasting evidence that some CEECs have shown more extensive privatisation efforts than some EU countries.
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Chapter 2: Structural reforms – where does Europe stand today?

Jørgen Elmeskov


Jørgen Elmeskov1 The end of 2002 (the time of writing) seems like an opportune moment to discuss Europe’s progress in structural reform.2 The impetus for structural reform appears to be fading despite the positive outcomes of past structural reform and despite the very long unfinished agenda many European countries face. Against that background, this chapter will focus on progress in structural reform in EU countries and how it relates to real incomes. This is not to deny that structural reform may have other beneficial effects, such as increasing the cyclical resilience of economies. But to keep things simple, structural reform will be reviewed only from the point of view of how it can contribute to higher real incomes. The first section below gives an overview of recent trends in real incomes across the main regions of the OECD and some of the proximate reasons behind these trends. The second section reviews progress on aspects of structural reform together with evidence on its effects. A brief final section sums up and provides some pointers for future policies. 1. THE ABILITY TO GENERATE REAL INCOME: UNITED STATES, EUROPEAN UNION AND JAPAN COMPARED In terms of generating real incomes, the United States leads Japan and Europe by a wide margin. Using GDP per capita as the measure of real income, Figure 2.1 (Panel A), shows that Japan and the European Union are, respectively, about a quarter and a third below the US level. These shortfalls are not the...

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