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Crisis Management in Central and Southeastern Europe

This study delves into the impacts of the financial crisis post-2008 on countries in Central and Southeastern Europe, analyzing economic indicators such as FDI, public debt, and government budgets. It explores the crisis management policies implemented, including austerity measures and IMF packages, and examines the political consequences, highlighting the influence of corruption and political scandals on government stability.

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Crisis Management in Central and Southeastern Europe

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  1. Crisis Management inCentral and Southeastern Europe Zoltán Egeresi 24/05/2013

  2. Country groups • EU membercountries(joined 2004) • EUmembers (joined 2007) or accedingcountries (2013) • EU candidatecountries • EU membershipaspirants

  3. Pre-crisissituation (2007-2008) • Small, openeconomies, exceptPoland • Growingeconomies • Except: Hungary • Increasing FDI inflows • Relativelylowpublicdebt • Except: Albania and Hungary • Relativelybalancedgovernmentbudgets • Higher deficit inAlbania, Hungary and Romania

  4. Impacts of the crisis (after 2008) • Decreasing FDI, domesticconsumption and remittances, reduceddemandforthe export, banking systemdifficulties • The extent of therecession (2009; y-o-y): • More than 5 pp: Croatia, Romania, Bulgaria, Hungary, Slovenia, Montenegro • Less than 5 pp: BiH, CzechRepublic, Macedonia, Serbia, Slovakia • Slowdown, but not recession: Albania, Kosovo, Poland • Secondwave of crisis: eurozonecrisisafter 2010 • Increasingpublicdebt • Increasingbudget deficit

  5. Stabilizationmeasures • Main purpose: enhancingfinancial and laterfiscalstability • Similarmonetarypolicies (baserate) • Eurozonemembers (Slovenia, Slovakia – Montengro, Kosovo) and BiH (fixed baserate) • Accedingcountriesin2004 (HU, PL) and Serbia • ɅɅ-shapedbaserate policy • Other Southeast European countries • Ʌ-shapedbaserate policy • IMF packages • Privatization

  6. Restrictivemeasures • Austerity measurestobalancethebudget(in line with IMF packages) • Typicalfeatures: • Cutting public sector salaries, pensions and social allowances • Increasingretirementageinsomecountries • Taxincrease (VAT) / newtaxes, reducingtaxallowances

  7. Governments: elections and crisis I.

  8. Governments: elections and crisis II.

  9. Political consequences • Relatively stable governments with reelection: Albania, CzechRepublic, Kosovo, Macedonia, Montenegro, Poland • Relatively stable governments failing to be reelected: Bulgaria(?), Croatia, Hungary, Romania, Serbia, Slovenia, Slovakia • Difficultiesingovernmentformation: BiH • Reasons of politicalcrisis: restrictivemeasures, corruption and politicalscandals

  10. Conclusions • The level of integrationinto European financialmarkets and economyinfluencedtheextent of thecrisis • Crisis management policiesbasedonthecombinationof incentiveand restrictivemeasures • Notonlytheseverecrisis, butpoliticalscandals and corruptionalsoaffectedthe life span of eachgovernment

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