Erik Berglof: Recovery is in Sight, but It Will Not Be Uniform

The panel discussion titled “Path to Recovery” indicated that the example of Greece and other countries that have irresponsibly managed public finances shows that fiscal discipline is a prerequisite for the stability of any economy.

Although optimistic regarding the crisis in the eurozone, the guests emphasized that it is time to consider the problems brought by the single market and currency, requiring Southeast European countries not to repeat the same mistakes made by some EU member states. The last panel discussion at the EBRD’s annual meeting in Zagreb focused on the recovery of European countries pressed by the global crisis, with a special emphasis on transition countries. EBRD Chief Economist Erik Berglof stated that GDP growth projections for 2011 in Southeast Europe are around 3.7 percent, emphasizing that the recovery will not be uniform. “One should not be deceived into thinking that this region will be able to meet all its needs through internal financing in the future, but this should be promoted as much as possible. In addition to fiscal discipline, the region also needs to strengthen competitiveness by developing the export sector,” concluded Berglof. Marek Belka, the IMF director responsible for Europe, believes that the region has a good foundation for recovery from the recession, partly due to the assistance of international financial institutions in some of them, and like Berglof, he believes that those countries that used loans for consumption and lived in abundance will recover the slowest. “Export sectors are recovering, but domestic demand is strengthening only in those countries that saved before the crisis broke out,” said Belka. Like many other countries, Ukraine will soon present its long-term recovery program. Iryna Akinova, advisor to the Ukrainian president, stated that after the shocks of last year, public finances are now in better shape, both due to changes in the fiscal system and the fact that orders from abroad have started to arrive.

The most interesting speaker on the panel was Božidar Đelić, the Serbian Minister of Science and also one of the key figures in negotiations with the EU, who outlined five key problems that Europe must face to prevent a crisis like this from recurring in the future. He considers the demographic structure of the population, which is aging, to be the first problem, as the number of working-age individuals is increasingly declining. The second obstacle he identifies is the euroization of economies, which, if not ready to transition to a single currency, face serious problems because they lack exchange rate instruments at their disposal. “The third key issue is raising the level of competitiveness. We must work on ensuring that Serbia is not known only for agriculture and Croatia for tourism. Such an export structure existed in our country even in the 15th century,” says Đelić. The fourth key concept he identifies is the concept of EU solidarity, which was fully expressed last week in the Union’s package intended to pull Greece out of the crisis. “It is hard to believe that those countries that contribute more to the Union will forever finance those that only spend and seek money,” he said. Finally, Đelić believes that joint economic projects across the Union, such as Airbus, are one way for Europe to resist giants like China and other strong global economies. (Amir Kulenović)