“The crisis demonstrated the limited capacity of EU institutions to conduct Union-wide anti-crisis policies,” Marek D?browski, president of the Centre for Social and Economic Research (CASE), told EURACTIV in an interview, predicting a “near-stagnation scenario” for many EU economies.
A professor of economics, Marek D?browski is president of the Warsaw-based Centre for Social and Economic Research (CASE). He is also a World Bank and United Nations Development Programme consultant.
He was speaking to Daniela Vincenti-Mitchener.
Do you think European governments responded properly to the crisis?
In my opinion, the anti-crisis responses of European governments were not always best tailored. Too often, short-term political considerations prevailed over the medium- and long-term economic rationales. I mean various examples of ‘economic nationalism’, especially in the financial sector, automobile industry and labour market areas, and losing control over public debt dynamics in most countries.
Sadly, the crisis also demonstrated the limited capacity of EU institutions to conduct Union-wide anti-crisis policies, mostly due to their limited fiscal capacity.
What are in your view the post-crisis economic prospects?
The most dramatic phase of the global crisis seems to be over, but economic prospects are still uncertain and rather bleak, especially in the short-term. It is unlikely that economic growth will return to pre-2008 trajectories soon.
For many EU economies, this will mean a real danger of a near-stagnation scenario and further build-up of public debt in relation to GDP. Major central banks (including the ECB) must balance a risk of withdrawing monetary stimulus too early (and thus create a new recession impulse) against the risk of inflationary pressure and/or building new bubbles (most likely on commodity and stock markets).
Is an international super-regulator inconceivable or essential?
We live in the world of the single, highly integrated financial market worldwide which needs transnational regulation and supervision. Otherwise transnational financial corporations will seek again arbitrage between national regulations, and many new products and trends on financial markets remained unnoticed by national authorities.
This need is even more obvious in the case of the EU, where the Single European Market of financial services should be monitored and supervised by the EU-wide regulatory authority.
The De Larosiere report is going in the right direction, but the question is whether the degree and speed of building the EU regulatory framework will be sufficient to meet the existing challenges.
The G20 recognised that policy coordination is needed. What kind of coordination?
So far the experience of the G20 looks quite promising. First, contrary to G7/G8, it gives a voice to large emerging-market economies whose role in the global economy further increased during the crisis. This allowed, among others, to strengthen Bretton Woods institutions and move forward discussions on reforming their voting system in favour of the developing world.
Second, it helped to mitigate the temptation to [introduce] protectionist measures and other kinds of beggar-thy-neighbour policies.
Third, it also helped to coordinate the macroeconomic policies of major economic actors in the short term, and advance discussion on closer financial regulatory cooperation on a global scale.
On the other hand, much depends on whether its cooperative spirit will be sustained beyond the immediate crisis period, and whether the G20 will succeed in unfreezing the global trade negotiations (the so-called ‘Doha Round’), building an effective institutional framework to coordinate financial regulations and macroeconomic policies in future and address other global challenges like climate change.