{"id":3474,"date":"2019-04-08T15:10:42","date_gmt":"2019-04-08T13:10:42","guid":{"rendered":"http:\/\/blog.cerge-ei.cz\/?p=3474"},"modified":"2019-04-08T15:12:27","modified_gmt":"2019-04-08T13:12:27","slug":"a-fragmenting-europe-in-a-changing-world","status":"publish","type":"post","link":"https:\/\/blog.cerge-ei.cz\/?p=3474","title":{"rendered":"A Fragmenting Europe in a Changing World"},"content":{"rendered":"\n

On 26 March 2019, Clemens\nFuest of the ifo Institute at the University of Munich came to CERGE-EI for the\nsecond year in succession to present the latest EEAG report to a full audience.\nProf. Fuest started by defining the fragmenting<\/em> aspect in the\ntitle of this year\u2019s report, explaining that the new Italian government that\nwent against many of the EU rules when defining their budget last year and the\nongoing Brexit negotiations have contributed to a destabilization of the EU.<\/p>\n\n\n\n\n\n\n\n

The main part of the\npresentation started with a look at the macroeconomic conditions in Europe.\nProf. Fuest commenced this section by stating that the Czech Republic is in the\nbest possible condition, with its main problem being a lack of workforce. Other\nmain indicators covered were GDP growth, a survey of the world economies by\ncontinent, and finally the global economic policy uncertainty index, which is\nworryingly higher than at any time in more than 20 years.<\/p>\n\n\n\n

The focus of chapter 2\nof the report was on the poor performance of Italy over recent years. It was\nhighlighted that this is not just a problem in specific regions of Italy, as is\noften believed, but when the economic performance was broken down by area, it\nwas visible that the country is failing as a whole. It was made clear that it\nis not desirable for Italy to leave the EU, for example as many of their large\ncompanies are in huge debt to the EU and any exit would result in the immediate\nrepayment of those loans and bankruptcy of at least some of these firms. <\/p>\n\n\n\n

Moving on to China, the\nimpact of trade on the EU economy was considered, showing the continuing rise\nof Chinese imports to the EU. However, in comparison to the US, the EU has\ntaken the opportunity of utilizing these imports better to also improve its\nexports. He stated that the EU remains open to trade with China without more\ntariffs than currently exist, in contrast to the US, although Chinese\ninvestments in the EU are being questioned as there is concern about excessive\nChinese influence and takeovers. Some of the evidence based on a study of\nChinese foreign acquisitions showed that state-owned enterprises (SOEs) have\nbeen active in the natural resources, manufacturing and infrastructure sectors,\nwhich is similar to SOEs from other countries. Chinese (SOEs and private\nenterprises) acquirers, however, are paying less for their takeovers, often\nsearching for distressed companies. One of the main conclusions of the report\nis that the EU needs to use the leverage it has as a larger group of nations to\npush for reciprocity when it comes to investment, particularly with\ninfrastructure. Prof. Fuest stressed that a common European policy is necessary\nif there is to be sufficient bargaining power when dealing with China in order\nto maintain a more even playing field.<\/p>\n\n\n\n

Tomas Holub, Czech\nNational Bank board member then took to the podium to add the Czech perspective\non the EEAG report. He opened with a look at Euro area (EA) convergence and\ncommented that there are several countries that have not converged to the\ndesirable level, notably Italy, Greece and Portugal. Czech economic convergence\nhas recently resumed after a pause during 2010-2013. Per capita GDP reached 83%\nof the EA19 in 2017 and is rising. Contrary to this, the price level has not\nperformed so well and is only at 65% of the EA19. Czech wages at purchasing\npower parity are roughly 60% of the EA19 average. Despite the fact that the\nCzech Republic is more economically prepared for euro adoption than ever, Holub\nstated that it is not desirable at the moment due to on-going challenges within\nthe eurozone, although it may be desirable in the long term. <\/p>\n\n\n\n

Following both of these\ninformative presentations the floor was opened to questions from the audience\nfor the final 30 minutes of the session. The lively Q&A session included\ntopics covering Chinese acquisitions, the role and importance of exchange rates\nin calculating the figures presented, and the recent slowdown in the EU\neconomy. Related to the last point it seems that the future of the European\neconomy is largely dependent on what will happen in China and the US. The issue\nof trade reciprocity with Russia was also questioned. Fuest said that Russia is\na very different situation from China; how far the arms of the Russian\ngovernment reach is an important consideration and the size of the Russian\neconomy is not as significant as China\u2019s and therefore Russia is not such an\nattractive proposition for trade expansion going forward. Convergence was\nquestioned further and in particular whether there will be a European state,\nbeing that we have a European currency. The answer came that provided we have a\ncentral bank that works well, a single European state will not be necessary.\nProf. Fuest believes that despite challenges and imperfect situations, the\nstatus quo can continue effectively. <\/p>\n","protected":false},"excerpt":{"rendered":"

On 26 March 2019, Clemens Fuest of the ifo Institute at the University of Munich came to CERGE-EI for the second year in succession to present the latest EEAG report to a full audience. Prof. Fuest started by defining the fragmenting aspect in the title of this year\u2019s report, explaining that the new Italian government that went … Continue reading A Fragmenting Europe in a Changing World<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":10,"featured_media":3475,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[180,1,143,52],"tags":[],"class_list":["post-3474","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-faculty","category-uncategorized","category-special-events","category-visiting-lecturers"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t