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Europe’s Growth Emergency

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  • Zsolt Darvas
  • Jean Pisani-Ferry

Abstract

Highlights 1) The European Union growth agenda has become even more pressing because growth is needed to support public and private sector deleveraging, reduce the fragility of the banking sector, counter the falling behind of southern European countries and prove that Europe is still a worthwhile place to invest. 2) The crisis has had a similar impact on most European countries and the US: a persistent drop in output level and a growth slowdown. This contrasts sharply with the experience of the emerging countries of Asia and Latin America. 3) Productivity improvement was immediate in the US, but Europe hoarded labour and productivity improvements were in general delayed. Southern European countries have hardly adjusted so far. 4) There is a negative feedback loop between the crisis and growth, and without effective solutions to deal with the crisis, growth is unlikely to resume. National and EU-level policies should aim to foster reforms and adjustment and should not risk medium-term objectives under the pressure of events. A more hands-on approach, including industrial policies, should be considered.

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Bibliographic Info

Paper provided by Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest in its series Working Papers with number 1105.

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Length: 23 pages
Date of creation: Oct 2011
Date of revision:
Handle: RePEc:mkg:wpaper:1105

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Related research

Keywords: economic growth; deleveraging; productivity; convergence; economic adjustment; structural reform scoreboard; composition of fiscal adjustments; growth policy under constraints;

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References

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  1. Reinhart, Carmen & Rogoff, Kenneth, 2011. "A Decade of Debt," CEPR Discussion Papers 8310, C.E.P.R. Discussion Papers.
  2. André Sapir & Jean Pisani-Ferry & Zsolt Darvas, 2011. "A comprehensive approach to the euro-area debt crisis," Policy Briefs 491, Bruegel.
  3. Carmen M. Reinhart & M. Belen Sbrancia, 2011. "The Liquidation of Government Debt," NBER Working Papers 16893, National Bureau of Economic Research, Inc.
  4. Sapir, Andre & Aghion, Philippe & Bertola, Giuseppe & Hellwig, Martin & Pisani-Ferry, Jean & Rosati, Dariusz & Vinals, Jose & Wallace, Helen, 2004. "An Agenda for a Growing Europe: The Sapir Report," OUP Catalogue, Oxford University Press, number 9780199271498.
  5. Brenke, Karl & Rinne, Ulf & Zimmermann, Klaus F., 2011. "Short-Time Work: The German Answer to the Great Recession," IZA Discussion Papers 5780, Institute for the Study of Labor (IZA).
  6. Benedicta Marzinotto, 2011. "A European fund for economic revival in crisis countries," Policy Contributions 504, Bruegel.
  7. Benedicta Marzinotto & Guntram B. Wolff & Mark Hallerberg, 2011. "How effective and legitimate is the European semester? Increasing role of the European parliament," Working Papers 612, Bruegel.
  8. Reinhart, Carmen & Kirkegaard, Jacob & Sbrancia, Belen, 2011. "Financial repression redux," MPRA Paper 31641, University Library of Munich, Germany.
  9. Jean Pisani-Ferry & Pavle Petrovic & Michael A Landesmann & Vladimir Gligorov & Daniel Daianu & Torbjörn Becker & Zsolt Darvas & André Sapir & Beatrice Weder di Mauro, . "Whither growth in central and eastern Europe? Policy lessons for an integrated Europe," Blueprints, Bruegel, number 453, June.
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Citations

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Cited by:
  1. Alan Ahearne & Guntram B. Wolff, 2012. "The debt challenge in Europe," Working Papers 686, Bruegel.
  2. Spencer, Thomas & Lucas, Chancel & Emmanuel, Guerin, 2012. "Exiting the crisis in the right direction: A sustainable and shared prosperity plan for Europe," MPRA Paper 38802, University Library of Munich, Germany.
  3. Zsolt Darvas, 2012. "Intra-euro rebalancing is inevitable but insufficient," Policy Contributions 747, Bruegel.
  4. Judit Karsai, 2012. "Development of the Hungarian Venture Capital and Private Equity Industry over the Past Two Decades," IEHAS Discussion Papers 1201, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.

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