Once a renowned gathering place for politics, profession, and business, Opatija and the annual conference of the Croatian Economic Society have not been particularly interesting to anyone for many years. However, the newly elected president of the society, a professor at the Faculty of Economics in Zagreb, Darko Tipurić, has ambitious plans. Due to his views on economic policy, where he still sees and wants state influence, especially in times of great change, we discussed significantly broader topics.
The annual gathering in Opatija takes place in the deep autumn that scares us every year. This time, the fear is not irrational, primarily due to inflation and its extinguishing recession. What if the German recession spreads across Europe?
– The last decade has been the decade of the cheapest money since records began. However, that period has definitely ended. Inflation has forced central banks to raise the price of liquidity/interest rates and thus try to ‘cool down’ the economy. However, the fight to reduce inflation continues with both state interventionist measures and market mechanisms. Recession is being invoked and is hard to avoid. Because, inflation erodes the real income of citizens, hitting the poorest segments of the population significantly harder than the wealthiest. For better protection of vulnerable groups and to stimulate economic growth, public policies should take into account the differences in the impact of inflation on different income classes and resort to more accurate indicators to determine the real cost of high prices for the poorest.
But recession hits deeper and longer.
– When we talk about the spread and characteristics of the slowdown, everyone agrees that a short-term recession is expected in the EU, along with our resilience and factors that will mitigate the spillover of recession onto domestic soil. They are well known: entries into the euro area and Schengen, as well as significantly increased use of EU funds that can alleviate recessionary pressures in the coming year in Croatia.
However, the question is how much it will alleviate given that the EU, as our main trading partner, is facing not only recession but also an increasingly pronounced lag behind the world.
– Correct, the EU is seriously lagging behind other leading industrial powers, primarily compared to the USA, China, South Korea, and Japan. The average economic growth in the European Union is lower than their growth, and overall productivity is a quarter less than that of the USA. Moreover, if the trend of deindustrialization continues, Europe would lose half of its current industrial employment in the next thirty years. The European industry also shows signs of lagging behind global competitors in artificial intelligence and in investments in new technologies. Therefore, Europe needs to continue strengthening its position as a global leader in essential areas such as the green economy, digital transformation, and social values. Standard trade patterns will certainly change, but not only as a result of the war in Ukraine but also due to the decreasing reliance of Western countries on trade with China and the rise of economic blocs such as the Association of Southeast Asian Nations (ASEAN). Trade between the EU and Russia will sharply decrease as Europe seeks to reduce its dependence on Russian oil and gas. In any case, it is crucial for Europe to ensure its own competitiveness, strengthen political stability, support innovation, invest in education and research, and strengthen ties with its partners around the world.
