European Integration in a Global Economy
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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.
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Chapter 13: Is the catching- up process in Central and Eastern Europe sustainable?

Anders Åslund

Extract

This chapter focuses on where the ten countries that joined the European Union (EU) in 2004 or 2007 stand on the road to convergence after the financial crisis of 2008–09. The countries under review here – from north to south – are Estonia, Latvia, Lithuania, Poland, the Czech Republic, Slovakia, Hungary, Slovenia, Romania and Bulgaria; together we call them Central and Eastern Europe (CEE) – all came out of the financial crisis quite well within about two years. This chapter investigates their fiscal sustainability and likely growth path and finds them set to continue the process of European convergence, though at a somewhat lower pace than before 2008. The first section of this chapter – which deals with the purely economic side of the crisis, leaving aside politics and political economy analysis – reviews the resolution of the financial crisis. The second section investigates what crisis resolution meant for competitiveness and future growth, compared with the PIGS economies – Portugal, Italy, Greece and Spain, the weakest and least developed part of the EU at the time of crisis. Finally, we conclude what this might mean for the future convergence of the ten new eastern members of the EU with the old members. The main conclusion is that the three Baltic countries have undertaken sweeping structural changes and are likely to achieve among the highest growth rates within the EU for the foreseeable future. But also the other CEE countries have carried out sensible changes and are likely to see their continued economic convergence with the EU, although Hungary is an exception.

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