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NEW EU MEMBERS OF CENTRAL AND EASTERN EUROPE Characteristics of Centrum – Periphery of the EU

NEW EU MEMBERS OF CENTRAL AND EASTERN EUROPE Characteristics of Centrum – Periphery of the EU Tibor Palánkai Emeritus Professor Corvinus University of Budapest Master Course 20 14. Prof. Palánkai Tibor. Centrum of the EU. Centrum of the European Union: 1. Northern „Core”:

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NEW EU MEMBERS OF CENTRAL AND EASTERN EUROPE Characteristics of Centrum – Periphery of the EU

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  1. NEW EU MEMBERS OF CENTRAL AND EASTERN EUROPE Characteristics of Centrum – Periphery of the EU Tibor Palánkai Emeritus Professor Corvinus University of Budapest Master Course 2014 Prof. Palánkai Tibor

  2. Centrum of the EU Centrum of the European Union: 1. Northern „Core”: • North Western EU (Austria, Belgium, Germany, Netherlands, Luxemburg, + Switzerland. • Scandinavian EU (Denmark, Finland, Sweden + Norway. 2. South Western Europe (Franc, Ireland, Italy and The United Kingdom.

  3. Peripheries of the EU 1.Southern EU: Greece, Spain, Portugal, Cyprus and Malta; 2.New Eastern Members: • Eastern Central Europe: (Czech Republic, Hungary, Poland, Slovakia, Slovenia + Croatia; • Baltic Countries: (Estonia, Latvia, Lithuania); • Eastern Balkan: (Bulgaria and Romania). 3. Western Balkan (Candidates): Albania, Bosnia-Herzegovina, FYR, Montenegro, Serbia.

  4. Central Europe The six Eastern Central European countries, which are distinguished from Western Central Europe: Austria, Italy (Veneto and Lombardy) or Germany (Bavaria and Baden Württemberg) or even Switzerland. ECE joined EU in the first round from 2004, except Croatia, which entered the Union in 2013. Romania and Bulgaria often claim to be Central European (joined in 2007).

  5. Dimensions of Analysis 1. Integration intensity and interconnectedness; 2. Post-industrial structures (about 2/3 -1/4 services and 20-25% manufacturing); 3. Ranking: Global Competitiveness Index (GCI), Per Capita GDP and KOF index. 4. Macro-economic Performance (Debt Crisis); 5. Trade balances. 6. Financial Performance.

  6. Per Capita GDP - Centrum North Western European Countries: EU27=100 Luxemburg 263% Austria 130% Netherlands 128% Germany 123% Belgium 120% Switzerland 160%

  7. Per Capita GDP - Centrum South Western European Countries: EU27=100 Ireland 129% France 109% UK 106% Italy 101% Scandinavian EU: Denmark 126% Sweden 126% Finland 115% Norway 195%

  8. Per Capita GDP - Peripheries Southern EU: EU27=100% Spain 96% Cyprus 92% Malta 86% Portugal 76% Greece 75%

  9. Per Capita GDP - Peripheries Eastern Central Europe: EU27=100% Slovenia 84% Czech Republic 81% Slovakia 76% Hungary 67% Poland 67% Croatia 62%

  10. Per Capita GDP - Peripheries Eastern Balkan: EU27=100% Romania 50% Bulgaria 47% Baltic Countries: Lithuania 72% Estonia 71% Latvia 64%

  11. Differences in Levels Development 2012 The population of West-Balkan candidates is only about 17 million, absorption possible easily. But high differences in level of development. Macedonia (FYROM) 35% (EU 27=100) Serbia 35% Montenegro 43% Bosnia-Herzegovina 28% Albania 30%

  12. Measuring Intensity of Integration We use the following main parameters for measuring intensity of integration: • Trade integration: flows, stocks, intensities; • Structure of trade relations; • Sub-regional concentration and interconnectedness; • Factor integration: flows, stocks, intensities;

  13. Measuring Trade Intensity Proposed scaling intensity of trade: Trade of goods or services in GDP (%), and intra-trade: Bellow 10%: Marginal (no) intensity; Between 10-30%: Low intensity; Between: 30-50% Medium intensity; Between: 50-70% High intensity; Above 70% Very (extremely) high intensity.

  14. Trade Intensities Total export of goods in GDP: • Very high: BE and SK. • High intensity: HU (3. 68.3%), CZ, NL, SL, EE. • Medium: GE, IR, AT, DK, FL, SE, MT, LT, PL, BG. • Low: FR, IT, UK, ES, PT, LV, RO. • Marginal intensity: EL (8.8%) and CY (7.7%).

  15. Trade Intensities Summary conclusions: 1.HU among the 5 most intensively integrated. 2.Benelux and C.E. + EE, IE are highly integrated. 3.Large countries (FR, IT, UK)+ ES, PT, RO, LV are lowly integrated. 4. Marginally integrated (total goods): EL and CY. 5. Others either medium or low (South EU-low).

  16. Flows of Capital - EU Integration(2009) Country Cm/GDP (%) Cx/GDP (%) Cx/Cm (%) Belgium 200 188 94 Ireland 111 130 116 Netherlands 81 120 149 Sweden 82 87 106 Finland 36 54 150 Denmark 50 64 128

  17. Flows of Capital - EU Integration (2009) Country Cm/GDP (%)Cx/GDP (%) Cx/Cm (%) Spain 4343 100 Portugal 4929 59 Austria 45 43 95 Italy 17 23 135 Greece 13 1293

  18. Flows of Capital – EU Integration(2009) Country Cm/GDP (%) Cx/GDP (%) Cx/Cm (%) Hungary 78 16 21 Czech R. 64 8 12 Slovakia 60 4 7 Poland 43 7 16 Estonia 84 33 40 Slovenia 3119 60 Romania 35 12 Bulgaria 63 1 1.5

  19. Summary of Capital Integration • High proportion of FDIs in GDP (50-70%) – indication of intensity of global integration. • Developed countries are characterised by net capital exporter position (Cx is about 40-50% over Cm). • This is an important parameter of level and balancedness of integration. • NMCs gradually capital exporters, but only beginning (Cx is only about 10-40% of Cm).

  20. Sub-regional Interconnectedness Relations are sub-regionally concentrated. It can be measured by comparing the shares of internal trade (export) and the population in total. Xia/Xt × 100/Pa/Pt ×100 Xia – internal export of A country or region; Xt – total export of the EU; Pa – population of A country or region; Pt – population of the Union.

  21. Sub-regional Interconnectedness RegionXia/xt×100 Pa/Pt×100 Quotient W-E 74.8 60.1 1.25 Scand. EU 6.0 5.0 1.20 East-CE 10.5 10.3 1.02 Baltics 0.7 0.8 0.93 South EU 6.6 13.8 0.47 Latin EU* 23.9 36.2 0.66 EU27 100 100 1 * Latin EU – FR, IT, ES, PT

  22. Sub-regional Interconnectedness There is a high concentration of the trade to the Centrum (80%); East Central Europe is closely connected to the Centrum, mainly through of West Central E.; Baltics close to average intensity and they connect to the Centrum through Scandinavia (SE, FL); The connectedness of the South is lower, even through „Latin” countries.

  23. „Strategic Partnerships” There are „Strategic Partnerships” – if share of the relation are more than 10% with a partner. The share of the EU15 in the trade of Eastern New Members is about 60%. But the share of ENMs in the trade of EU15’s is around 11-13%. Asymmetries, but they are strategic partners, they are relatively interdependent. Germany’s share is about 1/3 in CEE”s trade, but CEE is strategic partner of Germany with its 16% share.

  24. „Strategic Partnerships” DE as „inner centrum” of the EU. It gives 23.2% of EU total trade. Its share is 43% in case of AT and 11.4% of IE. It is number one partner for 21 countries 2. for CY, LT, PT and ES; 3. for LV and 4. for EE. The three large members, each (FR, IT, UK + NL) have more than 10% share in trade of DE, but AT and BE (7-8%), and PL (6%) are close to that. Centrum – relatively balanced interdependence.

  25. Trade Structures (Internal export) (%) Country Agr. R.M. Ener. Manuf. Other EU27 9.7 3.6 6.8 51.3 28.6 Germany 6.9 2.7 2.8 49.0 28.6 Sweden 5.9 7.9 8.3 44.5 33.3 Hungary 7.3 2.8 2.5 67.6 19.9 Czech R. 4.0 3.4 4.3 59.7 38.6 Slovakia 4.2 3.2 5.6 55.9 31.1 Portugal 10.4 5.9 3.8 36.4 43.5 Greece 25.6 5.2 7.1 27.3 34.8

  26. Trade Structures (Internal export) (%) Pattern of structural changes: • C. E. converged with developed EU. • High industrialisation of C.E. • Differences arise in terms of „others”. • Southern EU – high agriculture and lower industrialisation (even in case of ES).

  27. Trade Balances Countries Int. trade Ext. trade. Trade with GE BE. NL. IE, + + + HU. CZ, SK, + + + PL, + - - SL, - + + FR, UK, IT, AT - - - PT, ES, EL - - - EE, LT,LV, - - - BG,RO. - - -

  28. Summary of Real-integration • Extremely highly integrated countries: BE, NL, IR AT, LU, DK - Core of the Centrum; • HU, CZ, SK and PL –Eastern Central Europe. • Highly integrated countries: DE, FR, UK, IT, ES, FL, PT, SE, EE and SL. (large developed countries +) • Medium level integrated countries: EL, CY, ML, LT, LV, BG and RO.

  29. Rankings of theCore Countries GC. Index KOF Index Per capita GDP Lisbon Score- (2012) (2013) EU27=100 (2012) card (2009) AT 18. 4. 1. 130% 2. BE 16. 1. 8. 120% 12. DK 8. 6. 4. 126% 3. FL 4. 16. 9. 115% 5. DE 6. 22. 7. 123% 6. NL 7. 3. 2. 128% 4. SE 3. 7. 4. 126% 1. Per capita GDP:Switzerland: 160%; Norway: 195%. GCI – USA – 5.

  30. Measurement ofFinancial Performance Parameters 2012: Debt Servicing (D. S.): Good2.23 % > (EU27 Av.) Medium (2.23-5%) Poor 5%< Yields of Gov.Bonds (B. Y.): Good >3.74% (Av.) Medium (3.74-5%), Poor 5-10%, Crisis 10%< Risk premiums (R. P.): Good >1%, Medium 1-3%, Poor 3-5%, Crisis level: 5%<. Credit Rating (C. R.) 2013 (S&P)

  31. Macro-Performance of „ the Core” Country Inflation Budget Deficit Public Debt 2004 2009 2013 2004 2009 2013 2004 2009 2013 BE 1.9 0 1.2 0.1 5.6 4.0 94 96 100 NL 1.4 1 2.6 1.7 5.6 4.1 52 61 71 DE 1.8 0.2 1.6 3.8 3.1 0.0 66 75 81 AT 2.0 0.4 2.1 4.4 4.1 2.5 65 69 74 LU 1.3 2.2 2.6 1.1 0.8 0.6 6 15 21 DK 0.9 1.1 0.5 +2.1 2.7 4.1 45 41 45 FL 0.1 1.6 2.2 +2.5 2.5 2.0 44 44 57 SE 1.0 1.9 0.4 +0.6 0.7 0.2 50 43 38

  32. Macro-Performance of „ the Core” Country Economic growth (annual in%) Unemployment 1995-2008 2009-2013 2004 2013 BE 2.3 0.3 8.4 8.4 NL 2.6 -0.1 4.6 6.7 DE 1.7 0.8 9.8 5.3 AT 2.4 0.8 4.9 9.4 DK 1.7 -0.6 5.5 7.0 FL 3.4 -0.8 8.8 8.2 SE 2.6 1.5 7.4 8.0 EU27 3.6 -0.6 9.1 10.9

  33. Financial Performance of theCore 2012 Cs D. S. B. Y. R. P. C. R. AT G. G. G. AA+ BE M. G. G. AA DK G. G. G. AAA FL G. G. G. AAA DE G. G. G. AAA NL G. G. G. AA+ SE G. G. G. AAA

  34. Trade Balances of the Core Countries Int. trade Ext. trade. Trade with GE BE. NL. DE. +HS +HS + (DE n.a.) AT. +HD -LD - FL. SE . -LD +LS - LU +LS -HD - HS – High Surplus < 3% of GDP, LS – Low Surplus 0-3% of GDP, HD –High deficit< 3%, LD –Low Deficit 0-3% of GDP

  35. Rankings of South-Western Europe GC. Index KOF Index Per capita GDP Lisbon Score- (2012) (2013) EU27=100 (2012) card (2009) FR 18. 18. 109%. 10. IT 43. 23. 101%. 24. UK10. 12. 106% 8. IE 29. 2. 129% 7.

  36. Macro-Performance of South-Western Europe Country Inflation Budget Deficit Public Debt 2004 2009 2013 2004 2009 2013 2004 2009 2013 FR 2.3 0.1 1.0 3.6 3.5 4.8 65 79 90 IT 2.3 0.8 1.3 3.5 3.5 3.0 104 116 133 UK 1.3 2.2 2.6 3.5 11.5 6.1 41 68 89 IE 2.3 -1.7 0.5 +1.4 13.9 8.2 30 66 117

  37. Macro-Performance of South-Western Europe Country Economic growth (annual in%) Unemployment 1995-2008 2009-2013 2004 2013 FR 1.8 0.2 9.3 10.8 IT 1.3 0.2 8.0 12.2 UK 2.8 0.2 4.7 7.2 IE 6.1 -0.7 4.5 13.1

  38. Financial Performance of South-Western Europe Cs D. S. B. Y. R. P. C. R. FR M. G. G. AA IT M. P. P. BBB UK M. G. G. AAA IE M. P. P. BBB+

  39. Trade Balances of South-Western Europe Countries Int. trade Ext. trade. Trade with GE 1. FR - HD - LD - 2. IT - LD - LD - 3. UK - LD - HD - 4. IE + HS - HS +

  40. Rankings of Southern EU GC. Index KOF Index Per capita GDP Lisbon Score- (2012) (2013) EU27=100 (2012) card (2009) EL 90. 24. 75% 22. ES 36. 17. 96% 19. PT 45. 8. 76% 20. CY 47. 11. 92% 14. ML 51. 31. 99% 27.

  41. Macro-Performance of Southern EU Country Inflation Budget Deficit Public Debt 2004 2009 2013 2004 2009 2013 2004 2009 2013 EL 3.0 1.3 -0.9 7.5 15.6 9.0 99 130 157 ES 3.1 -0.2 1.5 0.1 11.2 10.6 46 54 86 PT 2.5 -0.9 0.4 4.0 10.2 6.4 62 84 124 CY 1.9 0.2 0.4 4.1 6.1 5.2 71 58 87 MT 2.7 1.8 1.0 4.6 3.7 3.3 70 66 71

  42. Macro-Performance of Southern EU Country Economic growth (annual in%) Unemployment 1995-2008 2009-2013 2004 2013 EL 3.6 -5.1 10.5 27.3 ES 3.4 -1.1 10.6 26.4 PT 2.1 -1.4 6.7 16.5 CY 3.6 -1.6 4.7 16.0 MT 2.9 1.1 7.4 6.5

  43. Financial Performance of Southern EU Cs D. S. B. Y. R. P. C. R. Greece P. C. C. B- Spain M. P. M. BBB- Portugal M. C. P. BB Cyprus - P. C. B- Malta - M. M. BBB+

  44. Trade Balances of Southern EU (2009) Countries Int. trade Ext. trade. Trade with GE Greece - HD - HD - Spain - LD - HD - Portugal - HD - HD - Cyprus - HD - HD - Malta - HD - HD -

  45. Rankings of Eastern Central Europe GC. Index KOF Index Per capita GDP Lisbon Score- (2012) (2013) EU27=100 (2012) card (2009) CZ 38. 15. 81% 10. HU 48. 9. 67% 23. PL 41. 26. 67% 21. SK 69. 19. 76% 18. SL 57. 30. 84% 11. CR 76. 33. 62% -

  46. Macro-Performance of East-Central Europe Country Inflation Budget Deficit Public Debt 2004 2009 2013 2004 2009 2013 2004 2009 2013 CZ 2.6 0.6 1.4 2.8 5.8 4.4 29 34 46 HU 6.8 4.0 1.7 6.5 4.6 2.0 60 80 80 SK 7.5 0.9 1.5 2.4 8.0 4.5 42 37 54 PL 3.6 4.0 0.8 5.4 7.4 3.9 46 51 56 SL 3.7 0.9 1.9 2.3 6.2 3.8 27 35 54

  47. Macro-Performance of East-Central Europe Country Economic growth (annual in%) Unemployment 1995-2008 2009-2013 2004 2013 CZ 3.7 -0.5 8.3 7.0 HU 3.1 -0.9 6.1 10.2 SK 5.1 1.1 18.2 14.2 PL 4.4 2.7 19.0 10.3 SL 4.1 -1.9 6.3 10.2

  48. Financial Performance of Eastern Central Europe Cs D. S. B. Y. R. P. C. R. CZ G. G. M. AA HU M. P. P. BB PL M. M. M. A SK G. M. M. A SL G. P. P. A

  49. Trade Balances of Eastern Central Europe Countries Int. trade Ext. trade. Trade with GE CZ +HS +HS + HU +HS +HS + PL +LS -LD - SK +HS +LS + SL -LD +LS +

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