Policy Response to the Crisis: How National Can It Be in CEE? Ivan Lesay Institute of Economic Research, Slovak Academy of Sciences Ministry of Finance of the Slovak Republic Debt, Finance and Economic Crisis: Consequences and Solutions Eurodad-Glopolis International Conference, Prague, June 3, 2013

Fiscal Profligacy? Government deficitCurrent AccountFinancial Account GR-5,4PT-9,3PT7,9 PT-4,2GR-8,4GR7,4 IT-2,9ES-5,8ES5,4 FR-2,7IE-1,9IE2,4 DE-2,3IT-1,3IT1 AT-1,6FR0,5FR-0,2 NL-0,6AT1,7AT-0,8 BE-0,3BE3 -2,8 ES0,5DE3,2DE-4,1 IE1,5NL5,5FI-4,4 LU2,3FI6NL-4,6 FI4,2LU10,6LU-11 % of GDP, avg. 2 Eurostat

Living Beyond Our Means? I. 3 DG Ecfin AMECO database

Living Beyond Our Means? II. DG Ecfin AMECO database 4

European Rescue: Public Funds Saving Private Assets Public intervention makes it easier for private investors to reduce their exposure in the Eurozone peripheries Greece’s current account deficit and its external financing (cum , US billion) 5 International Monetary Fund

European Remedy: Austerity and Structural Reforms (4P Report) I. Michal Polak, MF SR6

European Remedy: Austerity and Structural Reforms II. Michal Polak, MF SR7

European Remedy: Austerity and Structural Reforms III. Michal Polak, MF SR8

European Limits to National Anti-Crisis Responses Eurozone MS – missing central bank tools ◦ no exchange rate cushion ◦ no interest rate policy ◦ no last resort lender ◦ ECB: „we don't have a mandate“ EU: Stability and Growth Pact (Six-Pack, Two-Pack) ◦ Medium Term Objective ◦ Excessive Deficit Procedure EU25: TSCG (Fiscal Compact) ◦ Automatic Correction Mechanism 9

CEE Development Models: SK, SI, EE, CZ Type of capital inflows ◦ SK, CZ productive FDI vs. EE, SI ext. credit to non- tradables Current account position ◦ CZ (-); EE (↑ but risk); SK, SI (balanced) Private indebtedness ◦ SK (↓↓); CZ (↓); EE (↑↑ but adjusted); SI (↑) Financial sector condition ◦ CZ, SK (bailed out); EE (foreign); SI (↓) Dominant sectors in economies ◦ SK, CZ (export ind.); EE (services); SI (inbtw.) Public indebtedness: 50 % GDP (EE 10 %) 10

Summary and conclusions National anti-crisis responses possible (even desirable) but... ◦ National limits – economic development model path dependence ◦ (Eurozone) EU (monetary) fiscal limits Full-fledged anti-crisis response only if coordinated at the European level ◦ End austerity, admit the systematic nature of the crisis ◦ Ballanced development, productive (green) investment 11

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