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PERC/LO-N Regional Project – Tackling Taxation, Informal Economy and Corruption in the Western Balkans – towards better governance and democratic process Kick-off regional meeting 12 - 15 March 2013, Sofia. Current challenges and possibilities for changes Brun o S. Sergi
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PERC/LO-N Regional Project – Tackling Taxation, Informal Economy and Corruption in the Western Balkans – towards better governance and democratic processKick-off regional meeting12 - 15 March 2013, Sofia Current challenges and possibilities for changes Bruno S. Sergi University of Messina & ETUI
Some key issues in perspective Terrific expectations about EU membership in terms of social improvement and economic growth Today’s economic crisis
Relevant Challenges SEE TU economic experts’ network has already identified several relevant challenges and problems: • Unsustainable reduction in wages and pensions; • Growing inequality and injustice in the distribution of wealth; • A strict conditionality of the IMF and other international institutions, while governments often misuse IMF’s support thereby concealing bad national strategies and policies; • Labour market difficulties and uncertainty regarding who should be in charge of job creation; • Amendments to and passing of new labour laws have reduced workers’ rights, wages and fundamental standards of decent work.
EBRD Index for Banking Sector Reform and Interest Rate Liberalisation
Loans-to-GDP Ratio in % (loans to nonfinancial private sector)
Poverty Headcount Ratio at National Poverty Line (percentage of population)
IMF Advices “Tailored” to Individual Country Circumstances
Average amount of bribes paid in cash as percentage of GDPpercapita and as percentage of average nominal monthly salary, by country/area (2010)
Percentage distribution of bribes paid, by purpose of payment
Twin peaksBoth unemployment and government debt are high in advancedeconomies following the Great Recession Source: Finance & Development September 2011
Cutbacks hit homeFiscal consolidation reduces incomes and raisesunemployment in the short run.Impact of a 1 percent of GDP fiscal consolidation on GDP and unemployment Note: Chart reports point estimates and one-standard-error bands; income measured byreal GDP. See IMF (2010) and Guajardo, Leigh, and Pescatori (2011) for estimation details.
No job soonFiscal contractions raise unemployment, particularlylong-term unemployment Source: Finance & Development September 2011
Hitting paychecksSpending cutbacks affect wage earners the most. Source: Finance & Development September 2011
More austerity? • No! Jim O’Neill, president of Goldman Sachs asset management and father of the acronym BRIC: • introducing reforms does not imply austerity! • reducing a government’s deficit without a clear strategy for economic growth is not an intelligent policy. • No! Deutsche Bank: • it is important to let the ECB pump money into the system without having this imply conditionality. That is, the ECB should use anti-spread shield to cut interest rates on Italian and Spanish debt without having to ask additional austerity measures to the two countries.
Relevant Changes • Aligning Western Balkans’ legislation with the EU acquis in the field of labour law • Aligning the anti-discrimination laws with the EU acquis • Implementation of relevant social legislation • More efforts in the area of social dialogue • Cope with unstable and deteriorating labour markets • Free movement of labour with EU markets … (Croatian workers)? • NB: EU new budget (2014-2020) priorities: employment, innovation, effective management natural resources.
The Internet economy: a big change for the region? By 2016, there will be 3 billion Internet users globally, a bit less that half the world’s population. The Internet economy will reach $4.2 trillion in the G-20 economies: - if it were a national economy, the Internet economy would rank in the world’s top five, behind only the U.S., China, Japan, and India, and ahead of Germany. Across the G-20, it already amounted to 4.1% of GDP, or $2.3 trillion, in 2010—surpassing the economies of Italy and Brazil; - the Internet is powering growth and creating jobs. In an average country: +10% in the Internet usage increase employment of +0.44% and +1.47% of youth employment. The Internet economy in the developed markets of the G-20 is forecast to grow at an annual rate of 8% over the next five years. In developing markets, annual growth is expected to be 18%. These rates far outpace just about every traditional economic sector. This growth delivers new jobs across the employment spectrum and the jobs this growth creates are more valuable than others. Estimates show that in the United States the multiplier effect for high-tech positions is three times that for jobs in traditional manufacturing. Markets worldwide shows that in the last three years, small and midsize companies that have embraced the Internet in their business operations grew by 10% annually, adding jobs as they did so. Companies that have not grew more slowly or shrank over the same period. In recent years, multiple Central and Eastern European countries have undertaken efforts to build Internet enablement and engagement. Estonia’s EstWin program aims to provide every household and business with fast fiber-optic network access by 2015. Latvia and Lithuania rank among the top five countries for upload and download speeds
