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: Macroeconomic policy

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
 

Upcoming Event

May - Jun
31-1
10:30

MICROPROD Final Event

Final conference of the MICROPROD project

Speakers: Carlo Altomonte, Eric Bartelsman, Marta Bisztray, Italo Colantone, Maria Demertzis, Filippo di Mauro, Wolfhard Kaus, Steffen Müller, Gianluca Santoni, Verena Plümpe, Andrea Roventini, Valerie Smeets, Nicola Viegi, Markus Zimmermann and Javier Miranda Topic: Macroeconomic policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read about event More on this topic
 

Past Event

Past Event

What is in store for Euro area economies?

ECB Executive Board Member Philip Lane discusses the outlook for Euro area economies.

Speakers: Maria Demertzis and Philip Lane Topic: European governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: May 5, 2022
Read about event More on this topic
 

Past Event

Past Event

COVID-19 and the shift to working from home: differences between the US and the EU

What changes has working from home brought on for workers and societies, and how can policy catch up?

Speakers: Jose Maria Barrero, Mamta Kapur, J. Scott Marcus and Laura Nurski Topic: Inclusive growth Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: April 28, 2022
Read about event More on this topic
 

Past Event

Past Event

From viruses to wars: recent disruptions to global trade and value chains

How have events in recent years impacted global trade and value chains and how can we strengthen these against future disruptions?

Speakers: Dalia Marin, Adil Mohommad and André Sapir Topic: Global economy and trade Date: April 27, 2022
Read about event More on this topic
 

Past Event

Past Event

War in Ukraine: What is the effect on Central and Eastern Europe?

How is the war in Ukraine affecting the countries in the central and eastern parts of Europe, the countries that are closest to the ongoing conflict?

Speakers: Beata Javorcik and Guntram B. Wolff Topic: European governance Date: April 26, 2022
Read article Download PDF More on this topic
 

Working Paper

The low productivity of European firms: how can policies enhance the allocation of resources?

A summary of the most important policy lessons from research undertaken in the MICROPROD project work package 4, related to the allocation of the factors of production, with a special focus on the weak dynamism of European small and medium-sized enterprises (SMEs).

By: Grégory Claeys, Marie Le Mouel and Giovanni Sgaravatti Topic: Macroeconomic policy Date: April 25, 2022
Read about event
 

Past Event

Past Event

War in Ukraine: How to make Europe independent from Russian fossil fuels?

In this episode of the Sound of Economics live we discuss whether REPowerEU can make sure that Europe has affordable and secure energy supplies in both the near and long term.

Speakers: Diederik Samsom, Georg Zachmann and Guntram B. Wolff Topic: European governance, Green economy Date: March 31, 2022
Read about event More on this topic
 

Past Event

Past Event

Tackling future risks to banks

How to address vulnerabilities in banks in the coming years?

Speakers: Maria Demertzis and Elizabeth McCaul Topic: Banking and capital markets Date: March 29, 2022
Read about event More on this topic
 

Past Event

Past Event

Macroeconomic and financial stability in changing times: conversation with Andrew Bailey

Guntram Wolff will be joined in conversation by Andrew Bailey, Governor of the Bank of England.

Speakers: Andrew Bailey and Guntram B. Wolff Topic: Macroeconomic policy Date: March 28, 2022
Read about event More on this topic
 

Past Event

Past Event

Who will enforce the Digital Markets Act?

While the Digital Markets Act entered its first trilogue, what will be the enforcement role of the Commission and the Member States?

Speakers: Christophe Carugati, Cani Fernández, Assimakis Komninos and Georgios Petropoulos Topic: Digital economy and innovation Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: March 22, 2022
Read about event More on this topic
 

Past Event

Past Event

War in Ukraine: reflections on the economic consequences for Russia

Sergei Guriev joins us to discuss how the Russian invasion of Ukraine will affect the economies of Russia and the world?

Speakers: Sergei Guriev, Maria Demertzis and Guntram B. Wolff Topic: Global economy and trade Date: March 10, 2022
Read about event More on this topic
 

Past Event

Past Event

War in Ukraine: A conversation with Oleg Ustenko

Oleg Ustenko, Economic Advisor to Ukrainian President Volodymyr Zelenskyy joins us to discuss the situation in Ukraine.

Speakers: Guntram B. Wolff and Oleg Ustenko Topic: European governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: March 9, 2022
Load more posts