Crisis Lessons to Remember for Europe’s Policymakers

Let’s think now about some of the lessons from the global economic crisis for Europe’s policymakers. In my previous five blogs, I’ve discussed the challenges faced by both advanced and emerging European economies as we emerge from the acute phase of  the crisis. The questions I attempted to answer have included: In what shape and form will European integration survive the crisis? Will eastern Europe be able to sustain its remarkable catching up with living standards in western Europe?

Emerging Europe: Managing Large Capital Flows

Conventional wisdom has been that capital flows are a blessing to emerging economies, bringing needed funds to countries where investments are most productive.But if history is any guide, capital flows have proven to be highly volatile—surging in good times and collapsing in gloomy ones.

 

Reigniting Growth in Emerging Europe

As the deep recession in Europe’s emerging market countries finally comes to an end, the question on everyone’s minds is where  growth in the region will come from in the years ahead. Exports are rebounding, and domestic demand is showing signs of stabilization. Most countries will see positive GDP growth this year—a stark difference from 2009. But a return to the high growth rates that preceded the crisis is highly unlikely.

After the Crisis, Much Still at Stake for Eurozone

What a difference a year makes. January 2009 marked 10 years since the introduction of the euro. That anniversary fell in the midst of the worst global financial crisis in the past half century.

The euro—and the European Central Bank—proved important safeguards against the spread of the crisis. Countries whose currencies would likely have been subject to severe market gyrations had they not been part of the eurozone held their ground. And the ECB used innovative approaches, along with central banks around the world, to help provide liquidity and calm markets.

But as the crisis progressed, it became clear that the eurozone countries were affected in very different ways.

Markets took notice and the premia charged on sovereign bonds diverged. This month, as the euro turns 11 and even as the crisis is receding and an economic recovery is underway, prominent commentators—including Martin Wolf and Paul Krugman—are concerned that the strains within the eurozone are serious, and will need serious attention.

Unwinding Crisis Policies in Europe: Are we There Yet?

Much is riding on getting the timing of the exit right from the stimulative policies used to combat the global economic and financial crisis. This is something that IMF Managing Director Dominique Strauss-Kahn has repeatedly emphasized. Exiting too early may jeopardize the recovery. But exiting too late may sow the seeds for the next crisis, as Wolfgang Munchau and others have argued recently. I also agree with Jean Pisani-Ferry and his colleagues that exiting in an uncoordinated fashion will lead to a renewed build up of financial instability.

Unwinding Crisis Policies in Europe: Are We There Yet?

Much is riding on getting the timing of the exit right from the stimulative policies used to combat the global economic and financial crisis. This is something that IMF Managing Director Dominique Strauss-Kahn has repeatedly emphasized.Exiting too early may jeopardize the recovery. But exiting too late may sow the seeds for the next crisis, as Wolfgang Munchau and others have argued recently. I also agree with Jean Pisani-Ferry and his colleagues that exiting in an uncoordinated fashion will lead to a renewed build up of financial instability.