Implementation of the Macroeconomic Adjustment Programmes in the Euro Area: State-of-Play

CEPS Paperbacks, 2014

78 Pages Posted: 9 Apr 2014

See all articles by Daniel Gros

Daniel Gros

Centre for European Policy Studies, Brussels; CESifo (Center for Economic Studies and Ifo Institute)

Cinzia Alcidi

CEPS; Graduate Institute of International and Development Studies (IHEID)

Ansgar Hubertus Belke

University of Duisburg-Essen - Department of Economics and Business Administration; IZA Institute of Labor Economics; Centre for European Policy Studies

Leonor Coutinho

Centre for Banking and Financial Research, University of Cyprus; Europrism Research

Alessandro Giovannini

European Central Bank (ECB) - Directorate General International and European Relations

Date Written: March 11, 2014

Abstract

Two of the four macroeconomic adjustment programmes – in Portugal and Ireland – can be considered a success in the sense that the initial expectations in terms of adjustment, both fiscal and external, were broadly fulfilled. A rebound based on exports has taken hold in these two countries, but a full recovery will take years. In Greece the initial plans were insufficient. While the strong impact of the fiscal adjustment on demand could have been partially anticipated at the time, the resistance to structural reforms was more surprising and remains difficult to cure. The fiscal adjustment is now almost completed, but the external adjustment has not proceeded well. Exports are stagnating despite impressive falls in wage costs. In Cyprus, the outcome has so far been less severe than initially feared. It is still too early to find robust evidence in any country that the programmes have increased the long-term growth potential. Survey-based evidence suggests that structural reforms have not yet taken hold. The EU-led macroeconomic adjustment programmes outside the euro area (e.g. Latvia) seem to have been much stricter, but the adjustment was quicker and followed by a stronger rebound.

Keywords: macroeconomic adjustment programmes, macroeconomic adjustment, EU, fiscal adjustment

Suggested Citation

Gros, Daniel and Alcidi, Cinzia and Belke, Ansgar Hubertus and Coutinho, Leonor and Giovannini, Alessandro, Implementation of the Macroeconomic Adjustment Programmes in the Euro Area: State-of-Play (March 11, 2014). CEPS Paperbacks, 2014, Available at SSRN: https://ssrn.com/abstract=2422266

Daniel Gros (Contact Author)

Centre for European Policy Studies, Brussels ( email )

1 Place du Congres
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Belgium

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Cinzia Alcidi

CEPS ( email )

1 Place du Congres
Brussels, 1000
Belgium

Graduate Institute of International and Development Studies (IHEID) ( email )

132, Rue de Lausanne
Geneva, 1211
Switzerland

Ansgar Hubertus Belke

University of Duisburg-Essen - Department of Economics and Business Administration ( email )

Universitätsstr. 9
Essen, 45141
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Centre for European Policy Studies ( email )

1 Place du Congres, 1000
Brussels, 1000
Belgium

Leonor Coutinho

Centre for Banking and Financial Research, University of Cyprus ( email )

P.O. Box 20537
Nicosia, 1678
Cyprus

HOME PAGE: http://www.ucy.ac.cy/goto/hermes/en-US/HOME.aspx

Europrism Research ( email )

P.O. Box 14121
Nicosia, 2154
Cyprus

HOME PAGE: http://www.europrism.eu

Alessandro Giovannini

European Central Bank (ECB) - Directorate General International and European Relations ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany

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