Erik Berglöf: Europe Viewed from the East

What Eastern Europe’s Experience After the Crash Can Teach the World About Increasing Economic and Political Integration

Much attention has been given to Western Europe and its southern countries in the wake of the great financial crisis, but the developing region of Eastern and Central Europe has largely been overlooked despite its serious trauma.

In this next INET interview, Erik Berglöf, chief economist at the European Bank for Reconstruction and Development, catches us up on what has happened in this important region in the last few years. Berglöf, the newest of INET’s governing board members, is also the primary author of the EBRD’s new report “Transition Report 2010: Recovery and Reform.” This free report is filled with facts and analysis of an area that spans from Croatia through Russia and includes even parts of Central Asia.

In the interview, Berglöf lays out what can be learned from the varied experiences of the many different countries in the eastern sphere of Europe, such as how those that relied on investment in exports fared far better than those that invested in real estate. He also talks about how the crisis stressed the new model of an expanded and more integrated Europe but how it also gave countries within it some advantages and resiliency.

The region does, however, face some very serious ongoing challenges, such as increased competition with the emerging economies of Asia. And they are fighting many internal challenges like corruption and tax evasion. But the level of economic and political integration across the region also makes it easier for countries to emulate the best practices of those who innovate and solve problems early. In this experiment in deepening integration, the world beyond Europe may be able to learn as well.

You can watch a full version of the interview on video or watch individual segments on different ideas. We also invite you to go to the Q&A Forum and give your own answers or rate those of others to our question:

What can the world learn about handling the challenges of economic integration from Eastern Europe’s experience in the wake of the crisis?
 

 

Comments

Submitted by Val Samonis on Tue, 04/26/2011 - 12:45pm.
0

Just a couple of thoughts on the intersection of transitions to markets, integration, and new economic thinking.

Since the annus mirabilis 1989 the theory was that Central and Eastern Europe, CEE, would use its abundant and relatively educated labor force to grow faster and on a more sustainable and consumer-oriented (prosperity) basis due to shift to markets and eurointegration.

What got in the way is the theory of (rational?) expectations?

True, CEE did receive a sort of a very modest version of Marshall Plan from the EU. True to four EU freedoms, Western Europe is opening to labor movements (emigration) from CEE. So when new CEE policymakers were implementing liberal market reforms, they should have anticipated some outflows of labor force to higher bidders in Western Europe due to simple demonstration effect.

What got in the way is the law of unintended consequences in complex processes?

When the British opened their labor markets, they anticipated some 10-12 thousand immigrants from Poland, for example, what they got is some one million and rising.  Who knows what the figure will be when Germany opens this May?

The tale of two EU nations: What got in the way is the paradigm of hard-to-calculate policy externalities?

The current Kubilius Government of Lithuania adopted an ambitious (no IMF help sought) and rather harsh austerity modeled on the reigning EU thinking in order to clean the Augean stable of Lithuania's finance wrecked fo by former Soviet nomenklatura highjacked governments that simply used EU money to place their cronies in posh jobs (to the exclusion of younger generation of course), "prikhvatize" real estate and keep it from any taxation, etc. Before they realized what is going on and who was robbing them, the Lithuanian people got clubbered by this new ambitious austerity and the younger ones started emigrating in catastrophic numbers, seeing no future in the country whose GDP was reduced by some 20% or more by the combination of nomenklatura rent-seeking policies and the global Great Recession. Lithuania is hollowing out, becoming another Detroit. While the Lithuanians sobered well in time, the Greeks have been continuing the party until the last bottle:)

This is the tale of two integrating nations: they are even related since ancient times according to a Greek Palemonas legend.

Regards. Val Samonis, Toronto.

 

Submitted by Val Samonis on Fri, 04/13/2012 - 11:34am.
0

Lo and behold, one year after my comments as above, there are calls from Eastern Europe for CONTROLLED DISSOLLUTION OF THE EUROPEAN UNION:

http://www.garp.org/risk-news-and-resources/risk-headlines/story.aspx?ne...

We live indangerous times!

Val Samonis
Toronto

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