Chapter 2 : European Wage Dynamics and Labor Market Integration Employment is notably higher across Europe, and unemployment substantially down—there are even labor shortages in some countries. With many policy rates close to the zero lower bound and central banks still engaged in unorthodox policies, the scope for further, effective policy easing in response to new shocks is not large. So, as the region emerges from the crisis, the big question is how do we avoid a repeat? Europe has lagged behind to a certain extent, and that is a source of concern. In countries where inflation is hitting targets, it should gradually normalize. Third, with the United Kingdom leaving the single market, there is a more urgent need to advance the Capital Markets Union, which requires steps to promote harmonization of insolvency regimes and better protection of cross-border investor rights.
The combination of fiscal adjustment and easy monetary policy should also help the many economies that have rebuilt much-needed competitiveness since the crisis continue to lower their still-high net external liability positions. But the recovery is still modest and measures to boost economic growth and create jobs are important. Accordingly, the forecast is for growth to stay strong, reaching 2. Policymakers should seize the moment and push forward with reforms to increase growth potential and rebuild buffers that could support growth in case of negative shocks. Countries with ample fiscal space can and should use it to promote higher potential growth. This way, automatic stabilizers and fiscal stimulus can be deployed again, should downside risks materialize. On the one hand, estimates for output gaps point to little slack in most economies.
. They need to have stronger balance sheets. Of course, this means that Europe is benefiting from the general growth that is taking place throughout the world. Cross-border labor flows are generally seen to have beneficial macroeconomic effects. It could thus take some time before wage growth picks up noticeably and broadly in the advanced economies.
The positive impact on program countries is palpable—improving economies, lower spreads, and evidence of market access. By What has been the role of foreign banks in financing growth and convergence in Central, Eastern and Southeastern Europe, and how is that role changing? In countries where inflation is still subdued, monetary policy should continue to be supportive to ensure a durable increase in inflation to targets. Growth has firmed up in many European economies and the forecast is for more of the same. Given its extensive trade and financial linkages with the rest of the world, Asia is unlikely to delink. Substantial measures have already been put in place in the euro area to overcome the crisis. It has also been much weaker than after the global crisis of 1991.
Wide shot, traffic with tram, cars and people 9. These revisions reflect the stronger data flow on the back of past policy actions, the revival of investor confidence, and the waning drag from fiscal consolidation. Chapter 1 shows that investment has generally been subdued, and mainly for replacement purposes. This macroeconomic setting has brought a return to easy global financial conditions and high commodity prices-a situation likely to be sustained for some time but unlikely to be permanent. The source of these dynamics is explored in this chapter, which looks at the role of labor market slack, inflation, and productivity, as well as crisis legacies. In central and eastern Europe, by contrast, where economies are cyclically much further ahead, wages are growing rapidly and inflation is expected to pick up appreciably in 2018, potentially affecting competitiveness.
These are large upward revisions—0. This is possible to do. Chapter 1 : Managing the Upswing in Uncertain Times Europe continues to enjoy a strong growth spurt. On the other hand, unemployment rates—especially when defined broadly—still appear high, particularly in key advanced economies. The favorable outlook is subject to several risks that are mainly to the downside over the medium term. A multispeed global recovery is under way, with some emerging markets in the lead and the major advanced economies growing more slowly. Looking forward, improvements in prudential regulation could mitigate the procyclicality of credit standards, which should help reduce macroeconomic volatility.
By Economic growth across Europe is slowly picking up, which is good news. Second, there is a strong case for a central fiscal capacity, but access should be strictly conditional on compliance with the fiscal rules combined with mechanisms to prevent permanent transfers between countries. European markets have weathered the recent financial turbulence well, with capital flows to emerging market economies staying strong. As Chapter 2 discusses, the subdued wage dynamics in many advanced economies reflect low inflation and inflation expectations, still-high unemployment and underemployment rates, as well as sluggish productivity growth. While leading indicators have recently begun to ease, they remain at high levels. Europe has lagged behind to a certain extent, and that is a source of concern. Of course, this means that Europe is benefiting from the general growth that is taking place throughout the world.
The results indicate an undervaluation of the Armenian dram and no significant misalignment of the Georgian lari in 2006. The confluence of multiple adverse shocks - the turbulence in financial markets, high commodity prices, and the appreciation of the exchange rate - have depressed growth in Europe. In addition, there are signs that wage Phillips curves are very flat in advanced economies and that spillovers from regional labor market conditions and slow wage growth in some economies are contributing to wage moderation, holding back demand in other economies. At the same time commodity prices increases have boosted headline inflation. In a few advanced and many emerging economies, unemployment rates have returned to precrisis levels. Is there something that can be learned from the economies where wages are growing rapidly? In other parts of the world, in the U. It is therefore all the more important to rebuild room for fiscal policy maneuver.
They need to have stronger balance sheets. Executive Summary Europe continues to enjoy strong growth. The report discusses the varying policy challenges that different countries face as the global recovery proceeds. While this could mean that Asia has other sources of growth in the face of a U. Almost unnoticed amidst the difficulties in western Europe, the other half of the continent has begun to recover from the deepest slump in its post-transition period.