Convergence, Crisis, and Capacity Building in Emerging Europe


by Nemat Shafik

Central, Eastern and Southeastern Europe has been through a lot. In two short decades, the region moved from a communist planned system to a market economy, and living standards have converged towards those in the West.

It has also weathered major crises: first the break-up of the old Soviet system in the early 1990s, then the Russian financial crisis in 1998, and finally the recent global economic crisis. How did these countries do it?

From the Baltic to the Balkans, the region’s resilience and flexibility are the result of hard work and adaptability. But more than anything, it is the strong institutions built over the last two decades that have enhanced the region’s ability to deal with the momentous challenges of the past, the present—and those to come.

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Tackling The Jobs Crisis: What’s To Be Done?


by Gerd Schwartz and Ruud de Mooij

Faced with a jobs crisis, policymakers the world over are digging deep into their policy toolkits to generate more employment. A recent study by the IMF’s Fiscal Affairs Department argues that reforms of tax and expenditure policies offer great promise in helping countries confront the jobs crisis, including in the short term.

The study argues that improving employment outcomes, over and above what could be achieved through policies aimed at supporting the demand for goods and services by consumers and investors, requires actively supporting labor demand, strengthening incentives (or reducing disincentives) to work, and expanding training and job assistance, while preserving equity objectives.

The labor market challenge

The economic and social consequences of job losses since the onset of the global crisis have been enormous. However, as bad as the crisis has been for jobs, unemployment was already elevated before the crisis in many advanced and emerging economies. This would suggest that labor market challenges will not go away as the global economy recovers, and that policy measures are needed both to address structural employment issues and to improve the employment outlook in the short term.

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Mind The Gap: Policies To Jump Start Growth in the U.K.


By Ajai Chopra

The U.K. economy has been flat for nearly two years. This stagnation has left output per capita a staggering 14 percent below its precrisis trend and 6 percent below its pre-crisis level.

Weak growth has kept unemployment high at 8.1 percent, with youth unemployment an alarming 22 percent.

The effects of a persistently weak economy and high long-term unemployment can reverberate through a country’s economy long into the future—commonly referred to by economists as hysteresis.

Our analysis of such hysteresis effects shows that the large and sustained output gap, the difference between what an economy could produce and what it is producing, raises the danger that a downturn reduces the economy’s productive capacity and permanently depresses potential GDP. 

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Signs of Fiscal Progress: Will It Be Enough?


By Carlo Cottarelli

(Versions in  عربي, 中文EspañolFrançaisРусский日本語)

We’ve just updated our latest assessment of the state of government finances, debts, and deficits in advanced and emerging economies.

Fiscal adjustment is continuing in the advanced economies at a speed that is broadly appropriate, and roughly what we projected three months ago. In emerging economies there’s a pause in fiscal adjustment this year and next, but this too is generally appropriate, given that many of these countries have low debt and deficits.

The improvement in fiscal conditions in many advanced economies is welcome, but it’s going to take more than lower deficits to get countries under market pressure out of the crosshairs.
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Risks to Financial Stability Increase, Bold Action Needed


By José Viñals

(Versions in  عربي中文EspañolFrançaisРусский日本語)

Our latest update of the Global Financial Stability Report has three key messages.

First, financial stability risks have increased, because of escalating funding and market pressures and a weak growth outlook.

Second, the measures agreed at the recent European leaders’ summit provide significant steps to address the immediate crisis, but more is needed. Timely implementation and further progress on banking and fiscal unions must be a priority.

And third, time is running out. Now is the moment for strong political leadership, because tough decisions will need to be made to restore confidence and ensure lasting financial stability in both advanced and emerging economies. It is time for action.

Now, why have financial stability risks increased?

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World Faces Weak Economic Recovery


By Olivier Blanchard

(Versions in  عربي中文EspañolFrançaisРусский日本語)

The global recovery continues, but the recovery is weak; indeed a bit weaker than we forecast in April.

In the Euro zone, growth is close to zero, reflecting positive but low growth in the core countries, and negative growth in most periphery countries.  In the United States, growth is positive, but too low to make a serious dent to unemployment.

Growth has also slowed in major emerging economies, from China to India and Brazil.

Downside risks, coming primarily from Europe, have increased.

Let me develop these themes in turn.

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