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Europe’s Growth Emergency

Author

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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.

Suggested Citation

  • Zsolt Darvas & Jean Pisani-Ferry, 2011. "Europe’s Growth Emergency," Working Papers 1105, Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest.
  • Handle: RePEc:mkg:wpaper:1105
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    File URL: http://web.uni-corvinus.hu/matkg/working_papers/wp_2011_5_darvas_pisaniferry.pdf
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    Cited by:

    1. Alan Ahearne & Guntram B. Wolff, 2012. "The debt challenge in Europe," Working Papers 686, Bruegel.
    2. Judit Karsai, 2012. "Development of the Hungarian Venture Capital and Private Equity Industry over the Past Two Decades," CERS-IE WORKING PAPERS 1201, Institute of Economics, Centre for Economic and Regional Studies.
    3. 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.
    4. Zsolt Darvas, 2012. "Intra-euro rebalancing is inevitable but insufficient," Policy Contributions 747, Bruegel.

    More about this item

    Keywords

    economic growth; deleveraging; productivity; convergence; economic adjustment; structural reform scoreboard; composition of fiscal adjustments; growth policy under constraints;
    All these keywords.

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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