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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 4: An agenda for global economic growth –European challenges

Randall S. Kroszner


4. An agenda for global economic growth – European challenges Randall S. Kroszner EXPLORING GROWTH This is an exciting time to be part of the economic policy process. Thanks to recent research both inside and outside academia, policy makers have a clearer roadmap to follow when working to improve long-run growth. The main message of this research is that growth does not fall like manna from heaven. Well-designed economic policy is a prerequisite for productivity growth, which is the key source of higher living standards in the long run. Why should all countries in Europe make growth their top economic priority? To start with, consider the potential gains for European countries that have only recently embraced the market model. The challenge for these countries is to close the ‘productivity gap’, so that their economies can deliver the higher living standards of the traditionally capitalist countries in Europe. The policies advocated in the pro-growth agenda will help these countries move to the productivity frontier as quickly as possible. For developed countries, operating much closer to the productivity frontier, the challenge is slightly different. For these countries, a pro-growth agenda will ensure that their productivity frontiers grow as quickly as possible, because only productivity growth can deliver sustained increases in long-run living standards. Growing evidence suggests that the pro-growth orientation of American policy has played a large part in the recent increase in US productivity growth. From 1973 to 1995, US labour productivity grew at a rate that implied a doubling of...

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