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Europe: a portrait

Explore the great variation in size and characteristics of European economies, the convergence in economic ideology, the diversity in social models, and the implications for the future of Europe's economic growth.

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Europe: a portrait

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  1. Europe: a portrait

  2. GDP of EU members, 2013 Great variation in size of European economies

  3. Relative size of major world economies, 2013 EU– 28 is world’s biggest trading bloc – dwarves the size of major emerging markets

  4. Broad European characteristics • Most of Europe within EU (exceptions) • Member state populations vary from 0.4 million (Malta) to 87 million (Germany) • GDP per head 45 (Bulgaria) to 257 (Luxembourg) (EU28 – 100) • Social provision – 14% GDP in Latvia to 34.6 % in Denmark • A combination of common culture and history with key differences

  5. Common characteristics of European economies • Mixed economies – details vary • Similar trends in economic structure • Decline of primary and secondary sectors (i.e. agriculture and industry) – began earlier in Western Europe • Shift to service economy away from agriculture and manufacturing • 1960s: services c. 45% GDP in most countries • Early 2010s:70–80% the norm

  6. Convergence in economic ideology • Western Europe – Keynesianism displaced by neo-liberalism to varying degrees • Spain, Portugal, Greece – political dictatorship/economic isolationism – converged to Western Europe • Central and Eastern Europe – 45 years as Soviet satellite and command economy – 15 years transition – convergence with Western Europe

  7. Subject to similar domestic and international challenges • Environment • Employment • Demography • Increased competition from Asia • Technology changes • International economic cycles • Increased capital mobility • Economic interdependence • Economic and political integration

  8. Europe – unity and diversity • Diversity within broad general parameters • Diversity from interaction of: • economics • politics • history • social preferences and culture • Diversity leads to difference in emphasis for policy and business

  9. National differences • Different organisational structures • legal and finance structure • ownership • family firms, Mittlestand • Each country has own strengths • Germany: machinery/equipment, motor, chemicals • UK: food and beverages, publishing/printing, chemicals • France: food and beverages, chemicals, metal prods • Sweden: Motor, machinery/equip, pulp/paper

  10. European social models

  11. Sapir’s socio-economic models • Nordic model (Dk, Fin, Swe, Netherlands) • Highest level of social protection and welfare • Active labour market policy • Strong unions and compressed wage structures • Consensus

  12. 2. Anglo-Saxon (UK and Ireland) • Social assistance of ‘last resort’ • Weak unions, wide and increasing wage dispersion • High incidence of low paid work • Most market-oriented and little employment protection • Still differences to US where little insurance against labour market risk

  13. 3. Continental model (Austria, Belgium, France, Germany and Luxembourg) • The old social market model • Market to be regulated for socially acceptable outcome – for efficiency (now questioned) and equity • Those with stake in the system will be committed to it • Heavy reliance on insurance-based, non-employment benefits and pensions • Declining but still strong unions

  14. 4. Mediterranean (Spain, Portugal, Greece and Italy) • Much of social spending to pensions • Social welfare systems dominated by early retirement • Collective bargaining – strong compression • Strict employment protection

  15. Where do new member states fit in? • Differences but all have reconfigured their economic, political and social systems in last 15 years • In general – accepted economic liberalism • Baltic States “joining the EU would mean adopting rather more socially-oriented policies … Indeed a significant part of the Euroscepticism has been based on the notion that the EU is ‘far too socialistic’” Paas, 2003: www.ezoneplus.org/archiv/ • Bigger new members, not so aggressively liberal

  16. Above leads to Sapir’s model matrix

  17. Implications • Ideal = high equity/high efficiency • Framework does identify economies most in need of reform • Different models help explain why agreement can sometimes be difficult at European level

  18. Europe: the future?

  19. 2007–8 financial crisis caused serious problems for Europe – still recovering in some areas • Europe 2020 – a long term programme intended to restore competitiveness and deal with structural problems • Emphasises • Smart growth – i.e. education and R&D • Sustainability – efficient and green economy • Inclusive growth

  20. Europe 2020: a response to a perceived competitiveness problem • Employment • 75% of 20–64 year olds to be in employment • R&D • 3% of GDOP to be invested in R&D • Climate change and energy • GHG emissions to be 20% below 1990 levels • 30% energy from renewables • 20% increase in energy efficiency • Education • Early school leavers below 10% • 40% of 30–34 year olds with tertiary education • Fighting poverty and social exclusion • 20 million fewer to be at risk of poverty and social exclusion

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