Academic journal article Romanian Journal of European Affairs

Comparative Analysis of South Eastern Europe Economies Facing the Crisis. Future Prospects for the Region

Academic journal article Romanian Journal of European Affairs

Comparative Analysis of South Eastern Europe Economies Facing the Crisis. Future Prospects for the Region

Article excerpt

Abstract**: This paper analyses the effects of the global economic crisis in ten South Eastern European countries (Albania, Bulgaria, Bosnia and Herzegovina, Croatia, Greece, Kosovo, Macedonia, Montenegro, Romania and Serbia), within a European perspective. It also points out the main transmission channels of the economic crisis, by outlining the strong economic and financial ties with the EU, acting like contagion corridors in the event of global downturns. In terms of macroeconomic policy responses of the countries, these mainly led to increased fiscal deficits and public debts. Taking as benchmark the Romanian experience during the crisis, we outline several important structural reforms intended to boost competitiveness in the area. The paper concludes that, in spite of the recent negative evolutions, the SEE-W region has an important economic potential for the future. In the final recommendations we explore the creativity potential of the region, as a strategic opportunity for putting the region on the global competitiveness map.

Keywords: South Eastern Europe, growth, economic crisis, competitiveness

JEL classification: O11, F15, F4

1. Introduction

During the last ten years, South-Eastem Europe has been going through major transformations. The region has attained important progress in economic development, regional cooperation and integration in the global markets. However, the financial crisis that affected the western markets in the second half of 2007 made it clear that the region would face a major economic slump (Sanfey, 2010). The global economic crisis has also severely affected the European economies. After more than three years from the onset of the economic crisis, the efforts to mitigate the negative effects, to render public expenditure more efficient and to ensure sustainable economic growth have not vanished. Neither has the fear of a crisis revival worldwide.

The European Union (EU) and the Economic and Monetary Union have been experiencing the most challenging period since their inception. The Treaty on Stability, Coordination and Governance has been recently signed by 25 EU members states (all with the exception of the United Kingdom and the Czech Republic) and will pave the way for more fiscal discipline in the euro area: the structural deficits will not be allowed to exceed 0.5% of GDP at market prices and public debts exceeding 60% of GDP will be reduced by an average of 1/20 per year.

Taking into consideration this difficult economic context and the changing rules at the European level, the integration of South Eastern Europe (SEE) requires further scrutiny. This region has also been negatively affected by the crisis. That is why the paper focuses on the economic experience of these countries during the recent economic crisis. More precisely, the study considers 10 countries in SEE (SEE-10): Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Greece, Kosovo, Macedonia, Montenegro, Romania and Serbia. Greece became an EU member state in 1981, while Romania and Bulgaria took the challenge in 2007.

Croatia, which has gone through major structural reforms, is going to join the EU in 2013. Montenegro, Macedonia and more recently Serbia have been granted candidate status to the EU. In the case of Montenegro, the European Council launched the accession process with a view to open accession negotiations in June 2012. The other countries, Albania, Bosnia and Herzegovina and Kosovo are considered potential candidates for EU accession (European Commission - Directorate General for Enlargement, 2012).

The EU membership represents a continuous race to improve the economic performance and to diminish the real convergence gap with the core countries of the Union. Furthermore, each country has to define its identity and its place in the EU, avoiding the complex of "fax democracy", which means that public policies are designed in the EU and then simply applied in the region. …

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