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State-of-Play in Implementing Macroeconomic Adjustment Programmes in the Euro Area

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  • Gros, Daniel
  • Alcidi, Cinzia
  • Belke, Ansgar
  • Coutinho, Leonor
  • Giovannini, Alessandro

Abstract

Two of the four macroeconomic adjustment programmes, Portugal and Ireland's, can be considered a success in the sense that the initial expectations in terms of adjustment, both fiscal and external, were broadly fulfilled. A rebound based on exports has taken hold in these two countries, but a full recovery will take years. In Greece the initial plans were insufficient. While the strong impact of the fiscal adjustment on demand could have been partially anticipated at the time, the resistance to structural reforms was more surprising and remains difficult to cure. The fiscal adjustment is now almost completed, but the external adjustment has not proceeded well. Exports are stagnating despite impressive falls in wage costs. In Cyprus, the outcome has so far been less severe than initially feared. It is still too early to find robust evidence in any country that the programmes have increased the long-term growth potential. Survey-based evidence suggests that structural reforms have not yet taken hold. The EU-led macroeconomic adjustment programmes outside the euro area (e.g. Latvia) seem to have been much stricter, but the adjustment was quicker and followed by a stronger rebound.

Suggested Citation

  • Gros, Daniel & Alcidi, Cinzia & Belke, Ansgar & Coutinho, Leonor & Giovannini, Alessandro, 2014. "State-of-Play in Implementing Macroeconomic Adjustment Programmes in the Euro Area," Ruhr Economic Papers 482, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
  • Handle: RePEc:zbw:rwirep:482
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    References listed on IDEAS

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    7. Gros, Daniel & Alcidi, Cinzia, 2011. "Adjustment Difficulties and Debt Overhangs in the Eurozone Periphery," CEPS Papers 5525, Centre for European Policy Studies.
    8. Ansgar Belke & Gunther Schnabl, 2013. "Four Generations of Global Imbalances," Review of International Economics, Wiley Blackwell, vol. 21(1), pages 1-5, February.
    9. Romain Bouis & Romain Duval, 2011. "Raising Potential Growth After the Crisis: A Quantitative Assessment of the Potential Gains from Various Structural Reforms in the OECD Area and Beyond," OECD Economics Department Working Papers 835, OECD Publishing.
    10. Ansgar Belke & Christian Dreger, 2013. "Current Account Imbalances in the Euro Area: Does Catching up Explain the Development?," Review of International Economics, Wiley Blackwell, vol. 21(1), pages 6-17, February.
    11. Belke, Ansgar & Oeking, Anne & Setzer, Ralph, 2013. "Exports and Capacity Constraints – A Smooth Transition Regression Model for Six Euro Area Countries," Ruhr Economic Papers 449, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
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    Citations

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    Cited by:

    1. Ansgar Belke, 2014. "Monetary dialogue 2009–2014: Looking backward, looking forward," Intereconomics: Review of European Economic Policy, Springer;German National Library of Economics;Centre for European Policy Studies (CEPS), vol. 49(4), pages 204-211, July.
    2. repec:liu:liucej:v:14:y:2017:i:2:p:177-195 is not listed on IDEAS
    3. Ansgar Belke & Tobias Böing, 2014. "Sacrifice Ratios for Euro Area Countries: New Evidence on the Costs of Price Stability," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 47(4), pages 455-471, December.
    4. Belke, Ansgar & Gros, Daniel, 2016. "Negative Rates and Seigniorage: Turning the central bank business model upside down? The special case of the ECB," CEPS Papers 11753, Centre for European Policy Studies.
    5. repec:zbw:rwirep:0520 is not listed on IDEAS
    6. Ansgar Belke & Daniel Gros, 2017. "Greece and the Troika – Lessons from International Best Practice Cases of Successful Price (and Wage) Adjustment," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 14(2), pages 177-195, December.
    7. Belke, Ansgar, 2017. "Central bank communication: Managing expectations through the monetary dialogue," Ruhr Economic Papers 692, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    8. Belke, Ansgar & Gros, Daniel, 2017. "Optimal adjustment paths in a monetary union," Economic Modelling, Elsevier, vol. 67(C), pages 338-345.
    9. repec:bla:jcmkts:v:55:y:2017:i:6:p:1221-1238 is not listed on IDEAS
    10. Barslund, Mikkel, 2015. "Greece’s poor growth prospects," CEPS Papers 10856, Centre for European Policy Studies.
    11. Ansgar Belke & Jens Klose, 2017. "Equilibrium Real Interest Rates and Secular Stagnation: An Empirical Analysis for Euro Area Member Countries," Journal of Common Market Studies, Wiley Blackwell, vol. 55(6), pages 1221-1238, November.
    12. João Ferreira do Amaral & João Carlos Lopes, 2015. "The Trade-off Unemployment Rate/External Deficit: Assessing the Economic Adjustment Program of the Troika (European Commission, ECB and IMF) for Portugal using an Input-Output Approach," Working Papers Department of Economics 2015/04, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    13. repec:zbw:rwirep:0477 is not listed on IDEAS
    14. Ansgar Belke, 2014. "Monetary Dialogue 2009-2014 – Looking Backward, Looking Forward," Ruhr Economic Papers 0477, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    15. Ansgar Belke & Tobias Böing, 2014. "Sacrifice Ratios for Euro Area Countries – New Evidence on the Costs of Price Stability," Ruhr Economic Papers 0520, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    16. Alcidi, Cinzia & Gros, Daniel & Rinaldi, David & Núñez Ferrer, Jorge, 2017. "The Instruments providing Macro-Financial Support to EU Member States," CEPS Papers 12373, Centre for European Policy Studies.

    More about this item

    Keywords

    current account imbalance; Euro area; fiscal multiplier; investment; macroeconomic adjustment programme;

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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