Promoting prosperity and stability: the EMU anchor in candidate and potential candidate countries

This paper analyses the euro as external anchor in the Western Balkans and their process of fiscal consolidation in the context of future EU accession.Promoting wealth and stability: the EMU anchor in candidate and potential candidate countries, Euro as external anchor in the Western Balkans, use of the euro in the Western Balkans, fiscal consolidation in candidate countries, use of the DM and later the euro, use of external anchors and parallel currencies, candidate countries fiscal surveillance procedures, candidate countries fiscal policies, economic affairs of candidate countries and Western Balkans, economic policy related to enlargement

Economic Policy in EMU. Part A. Rules and Adjustment

This paper reviews the economic debate surrounding both the opportunities and the challenges arising from European monetary union. It is organised in two parts. Part I examines the economic environment in EMU, analysing the role of markets and the macro-economic framework. It finds that the prospect of EMU has already succeeded in creating a stable macro-economic environment, but that structural reforms aimed at better functioning markets take more time to be implemented and to produce results. Part II investigates the issue of adjustment in EMU in response to macro-economic disturbances, exploring the potential contribution of market mechanisms and macro-economic policies for coping with country-specific shocks. It finds that the new macro-economic framework will soon enable automatic stabilisers to operate better than in the recent past, but that it may take longer for market mechanisms to play their full part.II/0452/97-ENEconomic Policy in EMU. Part B. Specific Topics. (ECONOMIC PAPERS. No. 125. November 1997. European Commission. Brussels. 187 p. Tabl. Graph. Bibliogr. Free.)This paper explores a number of policy issues deriving from Economic and Monetary Union: - Monetary Policy and the Exchange Rate; - Budgetary Policy; - Shocks and Market Adjustment; - Real and Nominal Convergence. II/0453/97-ENOn January 1st 1999, Economic and Monetary Union (EMU) will move to its third and final stage. The exchange rates between the parties will be locked irrevocably and the euro will be introduced. The responsibility for monetary policy in the participating countries will be entrusted to the newly-created European Central Bank. European monetary union must be understood as comprising two separate, but complementary facets: a single currency, and a stable currency. These two facets correspond to the two interrelated objectives of EMU: efficiency and stability. The commitment by national public authorities to meet the terms of the Treaty on European Union for creating EMU is already bearing important fruit in terms of stability: in the past several years, the convergence towards low inflation has been spectacular and, although more efforts are in order, budget deficits have been substantially reduced. This has resulted in more stable nominal exchange rates and lower long term interest rates, thus paving the way to the current economic recovery. Although EMU represents first and foremost a monetary reform, its implications are much wider. The construction of EMU is geared towards the stability of the new currency, and sound public finances. Together with a well-functioning Single Market, this new policy regime is bound to bring about a new economic environment with fundamental consequences for the behaviour of public and private agents. The gradual elimination of budget deficits, as provided for by the Stability and Growth Pact, implies that government debt, currently still at too high levels, will be set on a consistently downward path. This will have beneficial consequences for interest rates and private investment, help restructuring public expenditure by giving more weight to growth-enhancing factors (such as investment in education and infrastructure), and raise the room for manoeuvre of national budgetary policies in stabilising the cycle. Budgetary discipline will also imply a new, fairer contract between the current and the next generation which will not have to shoulder the burden of today's spending choices. In total, with the change brought about by the EMU regime, the risk of a new stability conflict between the monetary and budgetary policies, which in the past repeatedly contributed to the unsatisfactory growth and employment performance of the Community, could be avoided in the coming years. Private agents, as consumers and producers, will not only benefit from lower transaction costs and simplification entailed by the replacement of multiple national currencies by the euro, but will also see their spectrum of choice broadened. The euro will strengthen the effects of the Single Market due to higher price transparency and greater competition. The relationship between factors of production will also undergo important changes. It will become apparent that if prices and wages are inconsistent with macroeconomic stability and with the Single Market rules, there will not be a “bail out†by public authorities - be it in the form of budgetary handout, looser monetary policy or “defensive†industrial policies. To the extent that wage and price behaviour anticipate this constraint, EMU will lead to a greater efficiency and higher employment. The changes in behaviour on the part of public authorities and private agents in the new EMU regime are desirable per se, as a means of tackling the structural problems faced by Europe, namely the high and structural unemployment and the budgetary consequences of ageing. Hence EMU acts as a catalyst of changes which would have to take place anyhow to shift the European economies on a path of sustainable growth and high employment. By definition, EMU implies the loss of national monetary autonomy. One of the criticisms often levied against the EMU project is that member countries will not be able to respond to economic disturbances via changes in national monetary policy or in their nominal exchange rate. It is then alleged that negative shocks will result in a surge of unemployment. In reality, the exchange rate, being a “national†instrument - in that it changes the whole set of domestic prices vis-à-vis third countries - is potentially appropriate only in a narrow set of circumstances, namely in the event of shocks affecting the entire national economy and only that economy. If the shock only effects a particular region or sector, a devaluation would lead to over-heating in other parts of the economy. Mutatis mutandis, the same can be said of monetary policy. Shocks that are truly national are already relatively infrequent. And they will become even more so once EMU is in place: The stability-oriented macroeconomic framework will reduce the likelihood of policy-induced shocks (such as disturbances originating in reckless fiscal behaviour), which in the past have been an important source of country-specific shocks. Moreover, the increasing trade interdependence among EMU members will further blur the economic importance of national boundaries, thereby reducing national specificity of economic developments. Admittedly, in those circumstances in which a change in the exchange rate or national monetary policy would have been useful, alternative adjustment channels will have to be provided for in EMU. At the macroeconomic level, a rapid reduction of deficits below the 3% threshold will create sufficient room for automatic fiscal stabilisers to offset cyclical downturns. Where structural adjustment, rather than mere macro-economic stabilisation is called for, changes in prices and wages will be needed. This requires that product and labour markets operate with greater flexibility. In conclusion, EMU offers important opportunities for better allocation of resources, higher growth and higher employment, but also challenges of completing the necessary budgetary consolidation and stepping up the reforms in product and labour markets. Meeting these challenges will ensure not only the full success of EMU, but will also help in solving Europe's structural problems.macroeconomic policy coordination, emu

Germany's growth performance in the 1990's

Since the short reunification boom, the German economy registered very low growth rates which are substantially below those of other EU countries. This paper analyses the underlying reasons for this under-performance. The fiscal burden of unification, the decline of the construction sector and a rigid labour market are found to be the most significant factors. A first chapter describes the short and long-run macro-economic developments during the 1990s, pointing in particular to the growth shortfall in the East and the decline in the construction sector. A second chapter finds that monetary and fiscal stance of the economy played only a minor role in reducing growth. Instead, as is shown in the third chapter, the root of the problem is that the economic challenges of unification were not addressed fully due to structural rigidities, which persist mostly in the labour market. As a consequence, without labour market reforms economic growth in Germany will continue to lag behind that of other European countries in the years to come.German unification, construction sector, labour market, economic growth

Adjustment capacity of labour markets of the Western Balkan countries

Study on the adjustment capacity to shocks of EU candidate and potential candidate countries of the Western Balkans, with a focus on labour markets, and background studies on several countries of the region. The main question addressed in this study is the performance of the labour markets in the Western Balkans; to find out whether they can deliver growth of employment and decline of unemployment in the medium run and whether they can withstand short-term shocks due to changes in demand or supply. The study finds that there is an important case for improving the rule of law and the quality of public services in general in the fight against very low participation and employment rates in the region, as well as very high unemployment. Wages, with some exceptions in specific sectors, do not seem to be mis-aligned with respect to productivity developments. There is some indication of possible positive effects from adjusting employment protection legislation, especially for women. The study also identifies an important role for income policies in some of the countries as an important complement to labour market policies.Adjustment capacity, external shocks, Western Balkan countries, South-East Europe, labour markets, EU candidate countries, potential candidate countries, employment protection legislation, rule of law, wages, productivity, taxwedge, remittances, migration

Informal and Formal Care among Single-living Elderly in Europe

The aims of this study were (1) to analyse whether informal care, provided by children or grandchildren to their elderly parents, and formal care are substitutes or complements, and (2) whether this relationship differs across Europe. The analyses were based on the newly developed SHARE (Survey of Health, Age, and Retirement in Europe) database. We found (1) that informal- and formal home care are substitutes, while informal care is a complement to doctor- and hospital visits, and (2) that these relationships in some cases differ according to a north-south gradient

Implementing the chronic care model for frail older adults in the Netherlands: study protocol of ACT (frail older adults: care in transition)

<p>Abstract</p> <p>Background</p> <p>Care for older adults is facing a number of challenges: health problems are not consistently identified at a timely stage, older adults report a lack of autonomy in their care process, and care systems are often confronted with the need for better coordination between health care professionals. We aim to address these challenges by introducing the geriatric care model, based on the chronic care model, and to evaluate its effects on the quality of life of community-dwelling frail older adults.</p> <p>Methods/design</p> <p>In a 2-year stepped-wedge cluster randomised clinical trial with 6-monthly measurements, the chronic care model will be compared with usual care. The trial will be carried out among 35 primary care practices in two regions in the Netherlands. Per region, practices will be randomly allocated to four allocation arms designating the starting point of the intervention. <it>Participants</it>: 1200 community-dwelling older adults aged 65 or over and their primary informal caregivers. Primary care physicians will identify frail individuals based on a composite definition of frailty and a polypharmacy criterion. Final inclusion criterion: scoring 3 or more on a disability case-finding tool. <it>Intervention</it>: Every 6 months patients will receive a geriatric in-home assessment by a practice nurse, followed by a tailored care plan. Expert teams will manage and train practice nurses. Patients with complex care needs will be reviewed in interdisciplinary consultations. <it>Evaluation</it>: We will perform an effect evaluation, an economic evaluation, and a process evaluation. Primary outcome is quality of life as measured with the Short Form-12 questionnaire. Effect analyses will be based on the “intention-to-treat” principle, using multilevel regression analysis. Cost measurements will be administered continually during the study period. A cost-effectiveness analysis and cost-utility analysis will be conducted comparing mean total costs to functional status, care needs and QALYs. We will investigate the level of implementation, barriers and facilitators to successful implementation and the extent to which the intervention manages to achieve the transition necessary to overcome challenges in elderly care.</p> <p>Discussion</p> <p>This is one of the first studies assessing the effectiveness, cost-effectiveness and implementation process of the chronic care model for frail community-dwelling older adults.</p> <p>Trial registration</p> <p>The Netherlands National Trial Register NTR2160.</p

Strategies of Multinationals and Government Revenues.

In 2001, the European Commission proposed replacing the current system of taxation of multinational companies by the taxation of a consolidated base, computed at the level of all the European entities of a multijurisdictional enterprise, and then distributed for taxation purposes between the various jurisdictions in which these entities operate, according to preestablished criteria. In this paper, we propose a tentative appraisal of that reform based on a case study and an analytical exercise. We especially focus on two related issues, the choice of the formula and the composition of the consolidating area – either the entire EU or some Member States within an Enhanced Cooperation Agreement –, and on their impact on the size and interjurisdictional distribution of tax revenue and social welfare, and on the intensity of tax competition. Our tentative policy conclusion is that this paper supports the reform provided that some conditions are fulfilled