Into the EU: Policy Frameworks in Central Europe

Description

The EU is set to expand significantly during in the first decade of the 21st century, with new members joining in a phased expansion of the European single market. This book examines the economic opportunities and challenges faced by five central European countries (the Czech Republic, Hungary, Poland, the Slovak Republic, and Slovenia) during the run-up to EU accession, and later, monetary union. It focuses on the key macroeconomic and financial sector policy issues that will need to be addressed to ensure sustainable growth for these transition economies. Cover Contents Preface 1 The Road to EU Accession Change in the Economy The Financial Sector Macroeconomic Policies 2 Enlarging the EU: Accession Requirements and the Central European Candidates 3 Real Convergence to EU Income Levels: Central Europe from 1990 to the Long Term Sources of Growth During Transition Structural Policies and Growth During Transition International Evidence on the Determinants of Long-Run Growth Growth Scenarios in the Long Run 4 Financial Sector Evolution: Challenges in Supporting Macroeconomic Stability and Sustainable Growth Financial Sector Development and Growth Interlinkages to Macroeconomic Policy Conclusions 5 A Framework for Financial Stability The Legal, Institutional, and Supervisory Framework Intermediating Capital Flows Risk Management Financial Safety Nets International Standards and IMF Surveillance Conclusions 6 Monetary and Exchange Rate Regimes Disinflation: Initial Success and Current Tensions The Run-Up to Accession: Regime Requirements and Goals in Context Considerations in Managing Flexible Regimes Back to the Future: Wide Bands and the Return to Fixity Capital Controls and Policy Safeguards 7 Balancing Fiscal Priorities Facing the Challenges Medium-Term Fiscal Positions: Choosing an Appropriate Target Revenue Reforms on the Way to EU Accession Need and Scope for Expenditure Reforms Reconciling Fiscal Objectives Medium-Term Fiscal Management in Practice Additional Risk Factors: Privatization Receipts and Fiscal Decentralization 8 The Challenges Ahead Text Boxes 2.1 The Acquis Communautaire 3.1 Estimating the Capital Stock in the CEC5 3.2 Total Factor Productivity Sensitivity Analysis 3.3 Investment Ratios and Capital Intensity: Italy 1960s; Spain 1970s 4.1 Troubles with IPB 4.2 The Macroeconomic Environment and Financial Sector Stability 4.3 Privatization Methods and Fiscal Costs of Bank Restructuring 5.1 EU Legislation Governing the Banking Sector 5.2 European Commission's Assessment of Progress Toward Accession in the Area of Financial Services 5.3 Impact of the Russian Crisis 5.4 Capital Inflows into Hungary in Early 2000 5.5 The Financial Sector Assessment Program 5.6 Stress-Testing of the Hungarian Banking System 6.1 Policies for Disinflation 6.2 The Maastricht Inflation Constraint and Szapary's Boxer 6.3 Currency Boards 6.4 The Many Possible Worlds of ERM2 7.1 Pre-Accession Economic Programs (PEPs) in Future Perspective 7.2 Medium-Term Fiscal Plans of the Accession Countries 7.3 Fiscal Adjustment and Growth 7.4 EU Pre-Accession Assistance 7.5 Planning Spending Restraint—An Illustration for Poland 7.6 Reconciling Medium-Term Fiscal Tensions: Two Cases From Recent History 7.7 Defining Elements of Medium-Term Fiscal Frameworks Figures 3.1 CEC5: Sources of Growth, 1989-99 3.2 CEC5: Investment to GDP Ratios, 1985-1999 4.1 Broad Money (M2) 4.2 Real Growth of Private Credit, 1996-2000 4.3 Interest Rate Differential, 1995-2001 4.4 Real Deposit and Lending Rates, 1998-2001 4.5 External Liquidity Position: Selected Countries, 1999 4.6 Deposit, Lending and Key-Policy Rates, 1998-2001 4.7 Credit to Private Sector, 1995-2000 5.1 Comparisons of Financial and Balance of Payments Vulnerability Indicators, 1998-2000 6.1 Monthly Headline Inflation in the CEC5: 1991-2001 6.2 Monthly Core Inflation in CEC5: 1993-2001 7.1 Government Balances in the CEC5 and the European Union, 1993-99 7.2 Revenue and Expenditure Trends in the CEC5 and the European Union, 1993-99 7.3 Old-Age Dependency Ratio in the CEC5 and Europe, 1990-2030 7.4 Indicators of Public Spending in the CEC5 and the European Union, 1998 7.5 Per Capita Income and Primary Current Spending in Selected Countries, 1998 Tables 3.1 Cumulative Output Growth and Its Sources 3.2 Sources of Growth in Golden Age Europe and Japan, and Recent East Asia 3.3 Projected TFP Growth for the CEC5 3.4 Panel Regression Results from a Sample of Six Transition Economies, 1992-99 4.1 Banking Sector Statistics 4.2 Equity Market Indicators 4.3 Profitability and Efficiency Measures, 1995-2000 4.4 Classified Loans/Assets as Share of Total Loans/Claims 4.5 Cost of Bank Restructuring for the Government and Central Bank, 1991-98 5.1 Extensiveness and Effectiveness of Financial System Regulations 5.2 Effectiveness of Shareholder Protection 5.3 Deposit Insurance Coverage 6.1 Exchange Rate and Monetary Policy Regimes in the CEC5 6.2 Exchange Rate Regimes and Basic Economic Characteristics of the CEC5 7.1 Medium-Term Fiscal Frameworks in Finland, the Netherlands, and the United Kingdom Appendices I. Setting Medium-Term Fiscal Targets: The Role of Public and External Debt and Current Account Considerations II. Revenue Trends and Tax Structures Appendix Boxes A1 The Impact of Fiscal Policy on Private Saving and Investment Appendix Figures A1 External Debt-to-GDP Ratios in Selected Middle-Income Countries, 1999 A2 Saving-Investment Balances in the CEC5, 1993-99 A3 Tax Ratios in the CEC5 and the European Union, 1994 and 1998 A4 Structure of Tax Revenue in the CEC5 and the European Union, 1998 Appendix Tables A1 Fiscal Balances and Public Debt Under Alternative Scenarios A2 Sovereign Ratings of Middle-Income Countries' Long-Term Foreign Currency Debt A3 External Current Account Balances and Foreign Indebtedness Under Alternative Scenarios A4 Medium-Term Fiscal Targets Anchored on External Debt and Current Account Constraints A5 General Government Revenue in the CEC5, 1994-98 A6 Social Contribution Rates in the CEC5, Europe, and the OECD A7 Main Elements of the Personal Income Tax System in the CEC5 and the European Union A8 Corporate and Value-Added Tax Rates in the CEC5 and the European Union References The Authors