Article

 

Europe and the Balkans: Economic integration, challenges and solutions. An introduction (p.11-15)

by

Camelia Turcu, University of Orleans, France

Nikolay Nenovsky, University of Orleans, France

Keywords : Balkans, Europe, Economic integration, Growth, Finance

JEL classification : E0, F0, G0, H0, P2, P3

Abstract

This special issue includes seven papers related to the South Eastern European countries macroeconomic performances, analyzed from the EU integration perspective and in the eye of the current crisis. It includes both policy oriented papers and empirical studies. The findings provide interesting insights on the economic, financial and institutional development in the Balkans, with a specific focus on the growth and technological challenges of the region, on its banks, pension systems and public finances.

 

 

Financial crisis, euro perspectives and the Balkans (p.17-35)

by

Ansgar Belke, University of Duisburg-Essen and DIW Berlin

Keywords : EU governance, European Council, European Financial Stability Facility, European Monetary Fund, policy coordination, Scoreboard, Stability and Growth Pact

JEL classification : E61, E62, F55, P48

Abstract

After having pointed to the large-scale problems of the status quo related to the euro area financial and debt crisis we describe the current crisis management framework and assess what its consequences and institutional follow-ups are. We then look at the implications of the latter for the Balkans: do they imply trouble for the Balkan EU perspective? We also briefly sketch what needs to be done in institutional terms in order to prevent future crises. The main part of the paper is devoted to an assessment of the seminal proposal of a European Monetary Fund. We derive that it is a preferable blueprint in our context. We finally convey an outlook on different issues: first on the still open and critical issues in euro area crisis management, second on the interaction of bank and sovereign debt resolution and, finally, also on the future economic performance of the Balkans, i.e. Croatia, Macedonia joint with Turkey, with an eye on the post-crisis era. We point out that the latter will be closely intertwined with the problem solution capacity in the euro area.

 

 

The impact of the crisis on foreign currency borrowing of households in CESEE - Implications for economic policy (p.37-47)

by

Elisabeth Beckmann, Oesterreichische Nationalbank

Helmut Stix, Oesterreichische Nationalbank

Keywords : Foreign currency loans, Behavior of households, Regulation, CEEC

JEL classification : D14, G21, G28

Abstract

The crisis highlighted the risks associated with foreign currency lending to households. Based on previous research and micro evidence from the Euro Survey of the Austrian Central Bank, this note shows that households in CESEE perceive foreign currency loans as riskier, but demand for these loans is remarkably stable. We argue that economic policy needs to distinguish between supply and demand driven foreign currency lending. If it is driven by demand factors, restrictive regulation might not be the remedy.

 

 

Corrupted transition: The painful re-education of the Balkan leviathans (p.49-69)

by

Momtchil Karpouzanov, European University of Lefke

Keywords : Transition, Corruption, European Union Integration, Bulgaria, Romania, Balkans

JEL classification : D73, O17, P26

Abstract

The EU integration of Romania and Bulgaria questions their future development and catching-up with EU standards both economical and political. Because of their specific patterns of transition, the Balkan countries struggle to embrace a genuine “rule of law” with strong reliable institutions. If institutions matter, their lack results in a growing and deepening lag in respect to the rest of the Union. While the perspective of EU membership was a major force of institutional alignment with the Union, once acquired it does no longer have the needed discipline effect. Endemic widespread corruption is an obvious characteristic of this ill transition with poor prospective results.

 

 

Capital pension schemes in Bulgaria, Hungary and Slovakia under the impact of the ongoing financial crisis (p.71-88)

by

Jeko Milev, University of World and National Economy, Sofia, Bulgaria

Nikolay Nenovsky, University of Orleans, France

Keywords : Pension funds, New EU members states, Financial crisis

JEL classification : G01, G23, P34

Abstract

This article describes how the recent financial crisis has affected capital pension schemes in three EEC countries: Bulgaria, Hungary and Slovakia. These countries were not selected at random. The pension systems in each of them have been reformed in recent years by the introduction of defined contribution schemes. The primary difference between each case comes from the period in which a multi-fund system (the ability for the insured individual to choose the risk profile of the asset portfolio into which he or she will invest) has been or will be adopted. In Slovakia, such a system has been employed since 2005, several years before the occurrence of the crisis. In Hungary, a multi-fund system was initiated in 2008, at the beginning of the crisis period. In Bulgaria, the project is still under discussion and has not yet been implemented. We evaluate whether the structuring of portfolios with different risk profiles leads to a reduction in the effects of the crisis. The article is organized as follows: first, the basic characteristics of the current funded pension schemes in Bulgaria, Slovakia and Hungary are described; second, the structures of the investment portfolios and the results achieved by the pension companies are analyzed; third, reflex ions about the basic risks facing capital pension schemes are made.

 

 

Political changes and economic development in Romania (p.89-105)

by

Carmen Pintilescu, “Alexandru Ioan Cuza” University of Iasi, Romania

Daniela Viorică, “Alexandru Ioan Cuza” University of Iasi, Romania

Dănuţ Jemna, “Alexandru Ioan Cuza” University of Iasi, Romania

Keywords : Electoral cycle, Economic growth, Budget balance

JEL classification : E20, E24, E63

Abstract

The insurance of the real convergence of Romanian economy with the economy of the European countries was strongly influenced by the economic unbalances that had occurred throughout the period 1990-2009. The sustained economic growth was, nevertheless, accompanied by greater budgetary deficits. The size of these unbalances was also accentuated by the fiscal and salary policies wrongly adopted during the electoral years. The current paper aims at studying the correlation between the budget balances and the electoral cycles registered in Romania during 1990-2009.

 

 

Bulgaria's export competitiveness befor and after EU accession  (p.107-128)

by

Paskal Zhelev, University of World and National Economy, Sofia, Bulgaria

Tzvetomir Tzanov, University of World and National Economy, Sofia, Bulgaria

Keywords : Export competitiveness, Revealed comparative advantage, Export sophistication, European integration, Manufacturing

JEL classification : F14, F15, L6, 014

Abstract

The paper gives an insight to the country’s export competitiveness in the framework of EU accession as the analysis covers the period 2002-2009. The results bear evidence of a low export performance in terms of diversification, factor intensity and technological sophistication and a significant lagging behind countries like Hungary, Slovakia, and in certain fields Romania. It is mostly attributed to low-grade sector specialization. The integration within the EU so far has not accelerated technological catch-up. For instance, recent evidence indicates unexpected export growth in traditional industries as Bulgaria overwhelmingly remains steadily anchored in low value-added competition on international markets.

 

 

Critical overview of Montenegro's growth model (p.123-146)

by

Fabris Nikola, Central Bank of Montenegro and Belgrade University

Mitrović Marijana, Central Bank of Montenegro

Keywords : Montenegro, Growth model, Crisis, Challenges, Recommendations

JEL classification : E60, E66

Abstract

There are numerous theoretical explanations of growth models, but the authors hereof intend to analyse the growth model of Montenegro, without any pretension to fit it in any of the existing theories, but to point to the key growth factors, the existing model’s limitations, and future actions to be taken in order to return Montenegro to the path of economic growth. In the pre-crisis period, Montenegro had been in a group of European countries experiencing the fastest growth. However, the global crisis induced a sharp decline in activity, unemployment increase, and severe difficulties in numerous sectors. The backbones of growth in the pre-crisis period were a large inflow of foreign accumulation and a high level of domestic aggregate demand. Such a growth created many contradictions so that it is likely that serious problems would have arisen even if it hadn’t been for the crisis. The paper consists of two parts. The first part gives an analysis of the existing growth model and shows why it is not viable in the long-term. The second part analyzes the challenges that Montenegro will face in the upcoming period and provides recommendations for acceleration of economic growth.