1. BASIC ECONOMIC CONCEPTS AND SOME CONTEMPORARY ISSUES Erasmus 2010

ECONOMICS AND MACROECONOMICS Macroeconomic environment -decissions of economic units: what, how, to whom, when -maximization: of utility, profits etc. -outcomes: inflation, unemployment, disequlibria -economic models Quantity=f(Prices, Incomes) -economic schools: neoliberalism, neokeynesianism

METHODS FOR ESTABLISHING GDP Σ(R i -MS i ) = (W j + P j + R j ) =C + I + G + (E - IM) value added = incomes = final demand with: R i, Ms i – sales and material costs of productive unit i, W j, P j, R j – salaries, profits and rents of people engaged in production, C – personal consumption, I - investments, G – government consumption, E – exports and IM - imports

GDP STRUCTURES PRODUCTION INCOMES FINAL DEMAND Value added Salaries Private Consumption Industrial Sectors Dividends Gross Investments (A-F) Retained Profits Government Consumption Services Depreciation Exports (G-O) - Imports GDP factor prices + indirect taxes+ indirect taxes - subsidies- subsidies GDP market pricesGDP market prices GDP market prices - incomes - incomes GNP market pricesGNP market prices - capital depletion NNP market prices

GDP STRUCTURES IN 2009 EMUEU27Slovenia GDP (bill €) Value added % -Agriculture Industry Services Incomes % -Wages and salaries Gross profits Indirect taxes - subsidies Final Demand % -Personal Consumption Government Consumption Investments Exports Imports

GDP IN 2009 GDP GDP/cap GDPGDP/cap bill €000 Belgium Bulgaria Belgium Bulgaria Germany Czech R Ireland Denmark Greece Estonia Spain Cyprus France Latvia Italy Lithuania Luxemburg Hungary Netherland Malta Austria Poland Portugal Romania Portugal Romania Slovenia Sweden Slovakia UK Finnland EMU EU

DEVELOPMENT LEVELS EU27 GDP/capita 000 €

DEVELOPMENT LEVEL AND ECONOMIC GROWTH OF EU10 BEFORE THE CRISIS

CONVERGENCE?

PERFORMANCE INDICATORS - Economic welfare and economic growth -Capacity utilization and unemployment -Stability and inflation -Equilibrium; internal and external -Income and wealth distribution -Other criteria - Value judgements

DEPENDENCE OF SLOVENIA ON THE EU (yearly growrh of GDP)

UNEMPLOYMENT RATE

INFLATION Euro področje

INCOME DISTRIBUTION

ECONOMIC EFFICIENCY AND SOCIAL COHESION

ECONOMIC PERFORMANCE OF CEE COUNTRIES level GDPgrowth unemploymentbudget balancepubli debt level (PPP) GDPgrowth unemploymentbudget balancepubli debt EU BG BG CZ EE LT LV HU PL RO RO SI SK

ECONOMIC PERFORMANCE OF CEE COUNTRIES (2007 or 2008) (8) (9)(10)(11)(12)(13)(14) (8) (9)(10)(11)(12)(13)(14) BG CZ ¸ EE LT LV HU PL RO SI SK ( 8) Current account/GDP(2007); (9) current account/GDP(2008); (10) net financial positiona/GDP; (11) foreign ownership in 1994 (12) foreign ownership in 2003, (13) share of foreign banks; (14) loans/deposits 2008;

EXTERNAL EQUILIBRIUM - SLOVENIA THE STRUCTURE OF CURRENT ACCOUNT BALANCE

EXTERNAL EQUILIBRIUM - SLOVENIA S INFLOWS AND OUTFLOWS ON THE FINANCIAL ACCOUNT

NET FINANCIAL POSITION

WORLD ECONOMIC CRISIS AND TRANSITION COUNTRIES ERASMUS 2010

INDUSTRIAL AND POST-INDUSTRIAL CAPITALISM industrial Savers Enterpreneurs- investors S < I Savers: Individuals corporations Enterpreneurs investors S > I post-industrial

FINANCIAL CAPITALISM Financial products Savers Financial investors investiments acquisitions speculations privatizations

THE ROOTS OF THE CRISIS 1 (J.Huffschmid)

THE ROOTS OF THE CRISIS 2 (J. Huffschmid)

FINANCE DRIVEN CAPITALISM (J.Huffschmid)

THE CAUSES OF PROBLEMS IN NMS AND FMS External vulnerability of NMS and FMS has been enhanced (1) by small size of the countries, (2) transition based on Washington consensus, (3) FDI addiction, and (4) too rapid convergence of standard of living enabled by foreign savings; The global credit reduction is hitting NMS and FMS with large external financing needs particularly hard; Continued exposure of parent banks is critical for NMS and FMS development to weather the storm; The recession in EU will hit NMS and FMS most through increased competition and resulting decrease of export demand

THE EFFECTS OF EUROZONE POLICIES ON THE RISKS FOR OTHER COUNTRIES Deposit and inter-bank guarantees put countries with weak fiscal credibility at a disadvantage Spillover effects of ECB policies: discrimination between EMU and non EMU countries (liquidity facilities, sovereign bonds as collateral, foreign exchange risks) The role of a central bank if the whole banking sector is foreign owned Bank recapitalization: implicit call to shrink balance sheets in CEE subsidiaries rather than at home