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The impact of the global financial turmoil and recession on Mediterranean countries’ economies

  • Sturm, Michael
  • Sauter, Nicolas

This paper reviews the impact of the global financial turmoil and the subsequent recession on the economies of southern and eastern Mediterranean countries. The major effects on the economies of this region have come through transmission channels associated with the real economy, i.e. the global recession. These are, in particular, declines in exports, oil revenues, tourism receipts, remittances and foreign direct investment (FDI) inflows, with the drop in exports so far appearing to have had the strongest impact. As a result, real GDP growth has weakened in the wake of the global crisis. However, the weakening of economic activity in the Mediterranean region has been less pronounced than in advanced economies and most other emerging market regions. The main reason for this is that the direct impact of the global financial turmoil on banking sectors and financial markets in Mediterranean countries has been relatively limited. This is mainly due to (i) their lack of exposure to US mortgage-related assets that turned “toxic”, a feature the region shares with other emerging markets, and (ii) the limited financial development of many countries in the region and their limited integration into global financial markets, a feature that distinguishes the region from other emerging markets and, in particular, from the euro area’s neighbours to the east. Notwithstanding the relative resilience of southern and eastern Mediterranean countries in the wake of the global crisis, the region faces significant challenges. In particular, many countries need significantly higher growth rates to address the employment challenge posed as a consequence of demographic developments. JEL Classification: C43, C51, D91

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Paper provided by European Central Bank in its series Occasional Paper Series with number 118.

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Date of creation: Aug 2010
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Handle: RePEc:ecb:ecbops:20100118
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  1. Stolz, Stéphanie Marie & Wedow, Michael, 2010. "Extraordinary measures in extraordinary times: Public measures in support of the financial sector in the EU and the United States," Discussion Paper Series 1: Economic Studies 2010,13, Deutsche Bundesbank, Research Centre.
  2. Matthieu Bussière & Emilia Pérez‐Barreiro & Roland Straub & Daria Taglioni, 2011. "Protectionist Responses to the Crisis: Global Trends and Implications," The World Economy, Wiley Blackwell, vol. 34, pages 826-852, 05.
  3. Gardó, Sándor & Martin, Reiner, 2010. "The impact of the global economic and financial crisis on central, eastern and south-eastern Europe: A stock-taking exercise," Occasional Paper Series 114, European Central Bank.
  4. Vergote, Olivier & Studener, Werner & Efthymiadis, Ioannis & Merriman, Niall, 2010. "Main drivers of the ECB financial accounts and ECB financial strength over the first 11 years," Occasional Paper Series 111, European Central Bank.
  5. Holm-Hadulla, Fédéric & Kamath, Kishore & Lamo, Ana & Pérez, Javier J. & Schuknecht, Ludger, 2010. "Public wages in the euro area - towards securing stability and competitiveness," Occasional Paper Series 112, European Central Bank.
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