1. Panel Discussion: What after the euro adoption?
J. Onno de Beaufort Wijnholds
European Central Bank
10th Dubrovnik Economic Conference
24/02/2019

2. What are the policy challenges related to membership of a monetary union?...
…The experience of Portugal and Spain might provide some valuable insights.
24/02/2019

3. Observation #1: Spain has outperformed Portugal as regards economic growth and fiscal solidity.
(Annual percent change/In percent of GDP)
1999
2000
2001
2002
2003
Real GDP
PRT
3.8
3.4
1.8
0.5
-1.3
ESP
4.2
2.8
2.0
2.4
Structural balance
-3.3
-3.9
-4.6
-2.1
-0.9
-1.0
-1.2
-0.7
1.0
Source: IMF.
24/02/2019

4. Observation #2: The much stronger increase in ULC in Portugal ... 1999
(Annual percent change)
1999
2000
2001
2002
2003
ULC
PRT
8.2
4.3
5.0
2.1
ESP
3.0
3.8
3.2
2.9
Source: Broad Economic Policy Guidelines.
24/02/2019

5. … had a bearing on the employment dynamics and the development of the current account.
(Annual percent change/In percent of GDP)
1999
2000
2001
2002
2003
Employment
PRT
1.8
1.7
1.6
0.2
-0.8f
ESP
5.5
3.7
2.0
2.7f
Current Account
-8.5
-10.4
-9.5
-6.7
-5.1
-2.3
-3.4
-2.8
-2.4
-2.5
Source: IMF.
24/02/2019

6. Observation #3: Spain has been more successful in attracting FDI than Portugal.
(In billions of euro)
1999
2000
2001
2002
FDI
PRT
1.2
7.4
6.6
4.5
ESP
14.8
40.7
31.3
22.5
Source: IMF.
24/02/2019

7. What are the lessons to be learned from these countries’ experiences?
Spain put its fiscal position on a sound footing and successfully implemented structural reforms.
Portugal conducted an overly loose fiscal policy and tackled less vigorously structural impediments to growth and employment creation.
24/02/2019

8. Conclusions
National policymakers face specific challenges in the context of a monetary union, relating inter alia to fiscal discipline, wage restraint and sound institutions. Failing to meet these challenges will adversely affect a country’s economic performance.
24/02/2019