Past Event

Structural reforms in Europe: policy lessons from the crisis

When are structural reform efforts successful in fostering productivity and growth when and why do they fail?

Date: September 18, 2018, 12:30 pm Topic: European Macroeconomics & Governance

AUDIO & VIDEO RECORDINGS


SUMMARY

Possibly the most common buzzword within the jargon of European policy, “structural reforms” have represented the benchmark of EU national economic policies in the aftermath of the financial and debt crises. The popularity of the expression has made the concept very broad, encompassing any sort of supply-side friendly interventions (usually changes in institutions and regulations): labour market reforms towards higher flexibility, reduction in the size of public administration, removal of barriers to competition and access to markets are just a few examples. The emphasis put on structural reforms by European institutions is clearly shown by the statistics presented by the chair Alessio Terzi (Affiliate fellow at Bruegel): 30% of the ECB Board executive members’ communications include a reference to structural reforms, compared to only 2% in those by members of the US Fed Board of Governors.  This attention, according to Klaus Masuch, Principal Adviser at the European Central Bank, can be explained by the importance that structural reforms have in creating a more suitable environment to the transmission of monetary policy, through its different channels.

After being restricted to South American and Asian experiences for decades, economic research has shown increasing interest in assessing the record of European countries with structural reforms. Such assessment, however, cannot be done in a purely technical way, at least according to Ana Fontoura Gouveia (Economist at the Research Department of the Banco de Portugal), who stressed some eminently political issues related to the promotion and implementation of structural reforms. To begin with, the goal itself of structural reforms is to enhance the long-term potential growth of an economy. This may or may not coincide with shared prosperity.  If and when these two objectives are in contrast, it requires a political decision to favour the attainment of one over the other.

The same goes for the potential trade-off between equity and efficiency. The former has been sacrificed too often to the latter, thereby fuelling resentments among the losers from such policies. Politics also has the crucial goal of defining priorities. As political capital of democratic representatives is limited, and potential areas of reform countless, some country-specific urgencies have to be selected and addressed effectively – a point all panellists agreed on, mentioning education, youth unemployment and the poorness of some countries’ institutions among candidates as utmost priorities. The discussion on reforms in the European Union and the Eurozone has also focused too much on national policies and too little on communitarian ones. The scope for improving on the latter (e.g., better tax coordination to prevent competition across EU member states) is sizeable, and would arguably improve the effectiveness of structural reforms at national level too.

Some of the points raised by Ms Fontoura Gouveia were not uncontroversial though. Mr Masuch disagreed on the practical relevance of the supposed trade-off between equity and efficiency, insofar as equity is intended as equal opportunities, and not as interference with market outcomes. On the contrary, most structural reforms would serve both goals: a simpler and more efficient public administration could offer better services (and disadvantaged people are those who need them the most); fighting tax evasion and addressing the excessive market powers of certain firms are other examples of non-zero-sum games. One possible exception is represented by labour market reforms, where the effects at the margin between unemployed and employed make the assessment harder equity-wise.

Paolo Manasse (Professor of Macroeconomics and International Economic Policy at the University of Bologna) disagreed on the potential divergence between higher long-term potential growth and shared prosperity, as a larger pie can benefit everybody as it increases the scope for redistribution. Alongside the existence of country-specific considerations, the Italian economist listed some criteria that have proved to be of the essence in determining the effectiveness of structural reforms in Europe (see presentation).  Timely implementation and a responsible political class able, or willing, to be held accountable for the reforms, clearly increase the chances of success. Other factors, such as the presence of external constraints (usually financial institutions), or the interaction between reforms and fiscal consolidation, have a more nuanced and often mixed impact.

Event notes by Jan Mazza

EVENT MATERIALS

Paolo Manasse Presentation

Schedule

Sep 18, 2018

12:30-13:00

Check-in and lunch

13:00-14:00

Panel discussion

Chair: Alessio Terzi, Former Affiliate Fellow

Ana Fontoura Gouveia, Economist, Research Department of the Banco de Portugal

Paolo Manasse, Professor of Macroeconomics and International Economic Policy, University of Bologna

Klaus Masuch, Principal Adviser, DG-Economics, ECB

14:00-14:30

Q&A

14:30

End

Speakers

Ana Fontoura Gouveia

Economist, Research Department of the Banco de Portugal

Paolo Manasse

Professor of Macroeconomics and International Economic Policy, University of Bologna

Klaus Masuch

Principal Adviser, DG-Economics, ECB

Alessio Terzi

Former Affiliate Fellow

Location & Contact

Bruegel, Rue de la Charité 33, 1210 Brussels

Matilda Sevon

[email protected]

Read about event More on this topic
 

Past Event

Past Event

Protecting workers in the platform economy

How can we protect platform workers while preserving the opportunities and benefits that are generated by the sharing economy?

Speakers: Payal Dalal, Mario Mariniello, Diane Mulcahy, Ana Carla Pereira, Jacob Rudbäck and Shamina Singh Topic: Innovation & Competition Policy Date: February 24, 2021
Read about event More on this topic
 

Past Event

Past Event

Money laundering and hybrid threats: Has COVID-19 made it all worse?

Will the European Union and its member states be ready to control this risk – even if competition for financial inflows intensifies?

Speakers: Arnis Praudins, Arnis Šnore, Nicolas Véron and llze Znotiņa Topic: Finance & Financial Regulation Date: February 18, 2021
Read about event More on this topic
 

Past Event

Past Event

Prospects for the US climate policy under the Biden Administration

How US climate policy is likely to evolve, and which international impacts can be expected?

Speakers: Jason Bordoff, Kate Marvel, Michael Mehling, Robert N. Stavins, Leah Stokes and Simone Tagliapietra Topic: Energy & Climate Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: February 17, 2021
Read about event More on this topic
 

Past Event

Past Event

The role of transition finance: a conversation with EBRD President Odile Renaud-Basso

Join us in conversation with EBRD President Odile Renaud-Basso.

Speakers: Odile Renaud-Basso and Guntram B. Wolff Topic: European Macroeconomics & Governance Date: February 16, 2021
Read about event More on this topic
 

Past Event

Past Event

Towards a European industrial renaissance?

An open-minded debate on the future of industry in Europe, hearing the perspective of European business leaders.

Speakers: Vinod Kumar, Jean-Marc Ollagnier, Claire Waysand and Guntram B. Wolff Topic: Innovation & Competition Policy Date: February 12, 2021
Read about event
 

Past Event

Past Event

Building back greener: sustainable finance and the Green Deal

How could additional regulation incentivise investment while upholding the integrity of sustainable finance?

Speakers: Klaas Knot, Sean Kidney, Alexander Lehmann, Isabelle Mateos y Lago and Philipp von Restorff Topic: Energy & Climate, Finance & Financial Regulation Date: February 11, 2021
Read about event
 

Past Event

Past Event

Disruption or transformation: the impact of a digital euro on the financial system

How would a digital Euro impact the financial system?

Speakers: Fabio Panetta and Guntram B. Wolff Topic: European Macroeconomics & Governance, Finance & Financial Regulation Date: February 10, 2021
Read article More by this author
 

Opinion

Will COVID accelerate productivity growth?

The COVID-19 pandemic has prompted an increasing number of rich-country firms to reduce their reliance on global supply chains and invest more in robots at home. But it is probably too soon to tell whether this switch will increase productivity growth in advanced economies.

By: Dalia Marin Topic: European Macroeconomics & Governance, Global Economics & Governance Date: February 10, 2021
Read about event More on this topic
 

Past Event

Past Event

Mobilising equity finance for Europe’s recapitalisation challenge

At this event we will discuss what sources of equity finance can help Europe emerge from the recession.

Speakers: Alexander Lehmann, Thomas Wieser, Laurent Zylberberg, James Chew and Katja Langenbucher Topic: Finance & Financial Regulation Date: February 9, 2021
Read about event
 

Past Event

Past Event

Carbon Border Adjustment Mechanism: Greening the EU trade?

Assessing CBAM from a trade perspective.

Speakers: Suman Bery, Luis Garicano, Emily Lydgate and André Sapir Topic: Energy & Climate, Global Economics & Governance Date: February 4, 2021
Read about event More on this topic
 

Past Event

Past Event

The geopolitics of the Green Deal

Join us to mark the launch of the eponymous paper co-written with the European Council on Foreign Relations.

Speakers: Stefano Grassi, Mark Leonard, Simone Tagliapietra, Jennifer Tollmann, Marc Vanheukelen and Guntram B. Wolff Topic: Energy & Climate Date: February 3, 2021
Read about event More on this topic
 

Past Event

Past Event

In search of a fitting monetary policy: the ECB's strategy review

The ECB is reviewing its monetary policy strategy. How to ensure monetary policy is fit for purpose in a fast changing world?

Speakers: Maria Demertzis, Philip Lane, Reza Moghadam and Erik F. Nielsen Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: January 27, 2021
Load more posts