Past Event

Role of national structural reforms in enhancing resilience in the Euro Area

At this event Gita Gopinath, Chief Economist at the IMF will discuss the role of national structural reforms in enhancing resilience in the Euro Area.

Date: June 17, 2019, 12:30 pm Topic: European Macroeconomics & Governance

video & audio recordings

summary

The event started with the presentation of an IMF paper titled Strengthening the Euro Area: The Role of National Structural Policies in Building Resilience. Shekhar Aiyar, Division Chief at the IMF, first made the remark that inspecting output and employment data across the EU, countries have diverged markedly in their performance. One of the reasons for this divergence is that due to structural dissimilarities in the economies, countries have responded differently to shocks. Recessions in euro area economies have been both more severe and more frequent relative to other advanced economies since the start of the monetary union. Structural reforms can help build economic resilience.

There are two types of structural reforms: union-wide architectural changes, and national structural reforms.  This paper focuses on the latter, quantifying the effects of product market reforms, labor market reforms, and reforms to corporate insolvency regimes. The authors find that more stringent labor and product market regulations are associated with reduced resilience on average and with weaker resilience to major recessions. Furthermore, higher-quality corporate insolvency regimes are associated with lower misallocation of inputs and more efficient capital allocation.

In addition, Romain Duval, senior advisor at the IMF, discussed the following points:

  • Structural reforms have a disproportionate impact on resilience for members of a monetary union.
  • Less flexible economies are more sensitive to shocks, including fiscal policy shocks – but fiscal space is key to any policy effectiveness.
  • National structural reforms can improve monetary transmission and reinforce architectural reforms.
  • National and EU-wide reform should go hand-in-hand to strengthen resilience of the Euro area.

Returning to the discussion, Gita Gopinath, the IMF Economic Counsellor and director of research, elaborated on the political viabilities of structural reforms. There is no one-size-fits-all approach; the two important principles are the adaptability of the labor market to cyclical conditions, and to ensure there is employee protection and a mechanism for employees to find new jobs.

Discussing the linkage between exchange rate flexibility and the euro zone, Gopinath remarked that because of adjustment in prices, there were countries that gained real exchange rate competitiveness (e.g. Spain). On the other hand, the countries that did not gain are the ones that are not very competitive. The paper highlights the importance of reforms, an area where not much progress was seen. Particularly in a period when the risks are high, it is important for countries to undertake structural reforms at the national level.

Discussing the architecture of the euro zone, Gopinath stressed the importance of capital markets union. The necessary reforms are better transparency, a common oversight authority, and minimum standards for corporate insolvency. In order for the euro to become a global currency, an important requirement is to produce a safe asset in the currency, something that a capital markets union would help deliver.

Speaking of the global landscape, Gopinath listed US-China trade tensions, the possibility of a no-deal Brexit, and high levels of private and public debt as major risks. Accounting for all the existing and possible tariff measures between U.S. and China, the IMF estimates that global growth will be reduced 0.5 percent in 2020.

Notes by Tianlang Gao

Schedule

Jun 17, 2019

12:00-12:30

Check-in lunch

12:30-12:40

Presentation of IMF Staff Discussion Note

Shekhar Aiyar, Division Chief, International Monetary Fund

Romain Duval, Senior Advisor, IMF

12:40-13:15

Panel discussion

Chair: Guntram B. Wolff, Director

Maria Demertzis, Deputy Director

Gita Gopinath, Economic Counsellor and Director of the Research Department, International Monetary Fund

13:15-13:30

Q&A

13:30

End

Speakers

Shekhar Aiyar

Division Chief, International Monetary Fund

Maria Demertzis

Deputy Director

Romain Duval

Senior Advisor, IMF

Gita Gopinath

Economic Counsellor and Director of the Research Department, International Monetary Fund

Guntram B. Wolff

Director

Location & Contact

Bruegel, Rue de la Charité 33, 1210 Brussels

Katja Knezevic

katja.knezevic@bruegel.org

Read article More on this topic More by this author

Blog Post

Croatia’s path into the banking union

Croatia seems a suitable candidate for euro area accession: there is a tight peg to the euro, high public debt is coming down, and the banking sector is already dominated by euro area banks. But the Eurogroup has rightly targeted reforms of the state’s role in the economy as a precondition for participation in ERM II and the banking union. None of the announced reform plans are new or easily concluded within the timeframe that has now been agreed.

By: Alexander Lehmann Topic: European Macroeconomics & Governance Date: July 18, 2019
Read about event More on this topic

Past Event

Past Event

Eurozone agreement: a mini revolution?

What does the new Eurozone budget do, and what does it not do? What are its strengths and weaknesses?

Speakers: Bruno Le Maire and Guntram B. Wolff Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: July 8, 2019
Read article More on this topic More by this author

Opinion

Farewell, flat world

In the last 50 years, the most important economic development has been the diminishing income gap between the richer and poorer countries. Now, there is a growing realisation that transformations in the global economy have been re-established centrally from intangible investments, to digital networks, to finance and exchange rates.

By: Jean Pisani-Ferry Topic: Global Economics & Governance Date: July 2, 2019
Read about event More on this topic

Past Event

Past Event

Tech-enabled payment processes: policy implications of new developments

What challenges does a shift towards new payment processes imply for EU financial services policy?

Speakers: Rebecca Christie, Etienne Goosse, Chirag Patel, Jörn-Jakob Röber, Johannes Vermeire and Nicolas Véron Topic: Finance & Financial Regulation Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: June 25, 2019
Read about event More on this topic

Past Event

Past Event

How comprehensive is the EU political realignment?

Has the left-right divide become obsolete in EU politics?

Speakers: David Amiel, Otilia Dhand, Nicolas Véron and Silke Wettach Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: June 25, 2019
Read about event More on this topic

Past Event

Past Event

China’s investment in Africa: consequences for Europe

How is Chinese investment impacting Africa, and what could be the consequences for Europe?

Speakers: Solange Chatelard, Maria Demertzis, Alicia García-Herrero, Abraham Liu and Estelle Youssouffa Topic: Global Economics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: June 24, 2019
Read about event More on this topic

Past Event

Past Event

Financial inclusion of SMEs for growth and job creation

How can increased access to finance benefit SMEs? What reforms are needed to encourage SME financial inclusion?

Speakers: Jihad Azour, Bruno Balvanera, Zsolt Darvas, Barbara Marchitto, Anta Ndoye and Guntram B. Wolff Topic: Global Economics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: June 21, 2019
Read about event More on this topic

Past Event

Past Event

Sound at last? Assessing a decade of financial regulation

What has changed since the financial crisis of 2008 that makes the financial system sound at last? Is regulatory reform going in the right direction? Has it run its course? 

Speakers: Patrick Bolton, Rebecca Christie, Maria Demertzis, Mathias Dewatripont and Xavier Vives Topic: Finance & Financial Regulation Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: June 20, 2019
Read about event More on this topic

Past Event

Past Event

What reforms for Europe's Monetary Union: a view from Spain

How is a successful European Monetary Union still possible in today's ever-shifting political landscape? What reforms need to occur in order to guarantee success of cohesive policies?

Speakers: Fernando Fernández, José Carlos García de Quevedo, Gabriele Giudice, Inês Goncalves Raposo, Javier Méndez Llera and Isabel Riaño Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: June 19, 2019
Read article More on this topic More by this author

Blog Post

GNI-per-head rankings: The sad stories of Greece and Italy

No other country lost as many positions as Greece and Italy in the rankings of European countries by Gross National Income per head, between 1990 and 2017. The tentative conclusion here is that more complex, country-specific stories – beyond the euro, or the specific euro-area fiscal rules – are needed to explain these individual performances.

By: Francesco Papadia Topic: European Macroeconomics & Governance Date: June 18, 2019
Read article More on this topic More by this author

Blog Post

Uncertainty over output gap and structural-balance estimates remains elevated

The EU fiscal framework strongly relies on the structural budget balance indicator, which aims to measure the ‘underlying’ position of the budget. But this indicator is not observed, only estimations can be made. This post shows that estimates of the European Commission, the IMF, the OECD and national governments widely differ from each other and all estimates are subject to very large annual revisions. The EU should get rid of the fiscal rules that rely on structural balance estimates and use this opportunity to fundamentally reform its fiscal framework.

By: Zsolt Darvas Topic: European Macroeconomics & Governance Date: June 17, 2019
Read article More on this topic More by this author

Blog Post

The campaign against ‘nonsense’ output gaps

A campaign against “nonsense” consensus output gaps has been launched on social media. It has triggered responses focusing on the implications of output gaps for fiscal policy under EU rules, especially for Italy. But the debate about the reliability of output-gap estimates is more wide-ranging.

By: Konstantinos Efstathiou Topic: European Macroeconomics & Governance Date: June 17, 2019
Load more posts