KEY ISSUESContext: Austria did not experience a severe boom-bust cycle and came through thecrisis relatively well. The main impact was on the banking sector and public debt. With cyclical slack low and the recovery taking hold, this is the time to resolve crisis legacies and address long-standing structural issues.Outlook and risks: The recovery is taking hold, driven by a pick-up in exports. The most acute risks are mainly geopolitical and could in particular lead to financial spillovers.Financial sector policies: Bank restructuring should now be rapidly completed and bad asset disposal accelerated. Large internationally active banks should stand ready for further capital increases, and the EU banking union framework needs to be swiftly transposed at the national level.Public expenditure reforms: More decisive expenditure reforms in key areas such as pensions, health care, subsidies, and fiscal federalism would generate savings that could be used for both an accelerated debt reduction and lower labor taxation.Boosting potential output growth: Enhancing IT adaptation, improving the performance of the education system, facilitating access to financing for innovative start- ups, and reducing administrative barriers for new businesses would raise potentialgrowth and labor productivity.
International Monetary Fund. External Relations Dept.
This paper analyzes how increasing population will impact the lives of people in the world in 2000. It underscores that in 2000, there will be more people, many living in crowded towns, suffering from even greater difficulties of transport and urban sprawl, both upward and outward. The provision of satisfactory housing for the mass of the population will be difficult, because, without subsidy, its construction would demand rentals equal at least to the occupant’s annual income, while to subsidize so many tenants would be impossible.
The member states of the European Community (EC) and the European Free Trade Association (EFTA) have a special relationship based on geographic proximity, a shared history, common values and—as many see it—a shared destiny.1,2 They are also each other’s most important trading partners (Charts 1 and 2). The EC countries account for over 50 percent of the EFTA countries’ exports and more than 60 percent of their imports. Indeed, the EFTA countries trade as extensively with the EC countries as the EC countries trade among themselves. On the other hand, the EFTA countries by themselves do not constitute a cohesive area. Intra-EFTA trade is—with the exceptions of trade between Switzerland and Austria and between Finland, Norway, and Sweden—insignificant relative to the trade of individual EFTA countries with the EC.
The issue of economic and political integration has been on the Western European agenda since the end of World War II (Siegler, 1961). The first step toward forming the European Communities (EC) was taken in 1951, when Belgium, France, Germany, Italy, Luxembourg, and the Netherlands formed the European Coal and Steel Community (ECSC) with a supranational administrative body, the High Authority.6 In 1955, following the failure of plans to form a European Defense Community and a European Political Union, the same six countries agreed in principle to form a common market, which envisaged the free movement of goods, services, labor, and capital—the “four freedoms.” The founding document of the European Economic Community (EEC)—the EEC Treaty, signed in March 1957—embodied a vision for broadly based economic integration going well beyond simple cooperation on trade issues.
A number of institutional and legal issues arise as a result of efforts toward intensified EC-EFTA cooperation. There is a need for increased mutual recognition in civil law, particularly with regard to commercial judgments, and the institutional changes that may be required as part of the creation of the EES. Other relevant issues include corporate law and industrial and intellectual property.
This paper presents an overview of the impact of the EC’s Internal Market on the EFTA countries. It starts by examining the history of EC-EFTA relations; the institutional and legal changes that closer cooperation may require; and the general implications of the Internal Market Program for EFTA countries. This is followed by an exploration of specific issues relating to the goods trade, transport services, labor mobility, financial services and capital flows. Subsequent chapters focus on the potential impact of the EC’s proposed monetary unification on EFTA countries and the implications of the EC’s efforts in the area of tax harmonization.
While the use of public resources is critical to cushion the impact of the financial crisis on the euro-area economy, it is key that the entailed fiscal costs not be seen by markets as undermining fiscal sustainability. From this perspective, to what extent do movements in euro area sovereign spreads reflect country-specific solvency concerns? In line with previous studies, the paper suggests that euro area sovereign risk premium differentials tend to comove over time and are mainly driven by a common time-varying factor, mimicking global risk repricing. Since October 2008, however, there is evidence that markets have become progressively more concerned about the potential fiscal implications of national financial sectors' frailty and future debt dynamics. The liquidity of sovereign bond markets still seems to play a significant (albeit fairly limited) role in explaining changes in euro area spreads.
Mr. Paul Louis Ceriel Hilbers, Angana Banerji, Haiyan Shi, and Mr. Willy A Hoffmaister
House prices in Europe have shown diverging trends, and this paper seeks to explain these differences by analyzing three groups of countries: the "fast lane", the average performers, and the slow movers. Price movements in the first two groups are found to be driven mostly by income and trends in user costs, and housing markets in these countries seem relatively more susceptible to adverse developments in fundamentals. Real house price declines among the slow movers are harder to explain, although ample supply, low home ownership, and less complete mortgage markets are likely factors. The impact of macroeconomic, prudential and structural policies on housing markets can be large and should be a factor in policy decisions.
This paper provides an overview of the likely impact of the creation of the European Community (EC) internal market on the European Free Trade Association (EFTA) members. The focus is on the four freedoms and the institutional and legal changes required for increased economic cooperation between the EC and EFTA. Although not formally part of the negotiations, certain tax issues are also raised. The paper is in ten parts and includes a summary and glossary. The paper also discusses the institutional and legal changes that may prove necessary for greater EC-EFTA cooperation and the implications of the internal market for trade, production, and resource allocation in the EFTA countries. It examines issues related to trade in goods-mainly industrial goods-and transport services and considers issues of labor mobility and trade in financial services. Changes would also appear desirable in the areas of industrial and intellectual property rights-notably counterfeiting, trademarks, copyrights, and patents.
IT IS A FAMILIAR PROPOSITION that changes in a country’s own par value, or in its exchange rate as customarily expressed in terms of a single other currency, give only a partial indication of the economically significant movements in its exchange rate. This comes most conspicuously into view when major adjustments in par values are made in the same direction by a number of countries at the same time. It is then apparent that these parallel adjustments in some degree qualify or dilute each other. Thus, the devaluation of sterling along with numerous other currencies in September 1949, and the devaluation of sterling along with a smaller number of other currencies in November 1967, occasioned calculations of the “effective,” as distinct from the nominal, adjustments that resulted for the currencies concerned, taking into account the impact of the concurrent nominal rate changes for the other currencies.1 Clearly, however, mutual influence of this kind is not confined to such par value changes as happen to be concurrent. The effective exchange rate of any single currency is always influenced by changes in the exchange rate, as customarily expressed, of other currencies, whether these changes are large or small, and whatever their timing.