Overcoming the economic and financial crisis Seizing the opportunity for reforming the global economy Date: November 2009 Venue: Hotel Athenee Palace Hilton, Bucharest Prof. Palánkai Tibor

The Crisis in the New Member Countries (Patterns, reactions, need for Reforms) Tibor Palánkai Emeritus Professor Corvinus University of Budapest Prof. Palánkai Tibor

About the Crisis It is a crisis of the global system. It started in the Centrum (USA), and spread over the world. Contrary to post-2001 crisis CEE negatively affected.

About the Crisis It is a structural crisis, all elements of social formation are affected: Crisis of techno-structure, particularly energy and environment (unsustainable). Crisis of the institutional and regulation system (so far globally “negative integration” – deregulation and liberalisation). Social crisis, due to large social inequities created by transformation and globalisation.

Reactions to Crisis in NMSs The financial crisis reached also the NMSs. The collapse of the banking system, was avoided. The big dependence (large share) on foreign commercial banks, both advantage and disadvantage. A certain exchange rate “bubble”, kept under control. Credit crisis has paralysing impacts on real economy.

Reactions to Crisis in NMSs Threats and attempts of protectionism, but they remained limited. Only certain sectors and cases. The basic trading frameworks (WTO and Single European Market) were not questioned. The danger is not yet over.

Diverging government interventions The main measures: launching infrastructural programs, cut in taxes and social contributions, old car replacement programs, support of small and medium companies etc. Discussions about Keynesian type of interventions, which in globally open economies can be easily open-ended (particularly for smaller countries), or Schumpeterian approach, support for innovation and structural change.

Crisis of Global Car Industry It has become a typical crisis industry. The fundamental restructuring of car industry is unavoidable (low energy and pollution, electric cars etc). Unclear, how the decisions of major car companies affect their NMSs investments.

Coping with Energy crisis NMSc are particularly exposed. Both in terms of costs, and security of supply. The share and use of alternative sources is slowly growing. They separately are too small and have limited resources to exercise any impact. Joint EU efforts would be needed. NMSs could play an active role.

Joining Euro-Zone Most of the NMSs had a chance to introduce euro by the end of 2000s. Except Slovenia and Slovakia this possibility was missed, it was a mistake. Proper national economic policies and political determination and More coherent and far sighted EU policies are needed.

Social Crisis In all NMSs, great majority of the society was negatively affected by transformation after , and associated also with globalisation.. The years of tolerance of difficulties faded away, and the social dissatisfaction and tension gradually increased („transformation and enlargement fatigue”). Now, aggravated by the present crisis. Dangers: populism, growth of extremist forces, social conflicts, opposition of necessary reforms.

Can „Trend Change” be Assumed? In spite the re-starting recovery, the crisis would not be over. On contrary, the re-emergence of energy or agricultural crisis could be hardly avoided. Present structures are unsustainable. Some feel that a trend change is needed. That would assume painful adjustments, and unemployment could persist for more years.

Need for Fundamental Reforms Restructuring economies, mainly in terms of coping with energy and crisis of environment. Challenge of knowledge based society. Reform of education and retraining system. Addressing the crisis of governance, on all levels (local, national, regional (EU) and global). Coping with social inequities. More „positive” social policies are needed, concentrating on education and retraining, creation of jobs, supporting of enterprising (SMEs), preserving health etc.

END THANK YOU

Prof. Palánkai Tibor