The Question of Instability, Uncompetitiveness and Growth Slowdown of Small Middle –Income Countries in the Euro Area
The thesis of this article is that a small country with a below-average per capita income is in a disadvantaged macroeconomic position inside the euro area. Small middle-income countries expected an acceleration of growth by joining the EMU. They were hoping to catch up in the convergence process wi...
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University of Ljubljana
2013-12-01
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| Series: | Economic and Business Review |
| Online Access: | http://www.ebrjournal.net/ojs/index.php/ebr/article/view/253/pdf |
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doaj-28f5cf4c6c64438cb5af689e86f0a55e2020-11-24T23:56:36ZengUniversity of LjubljanaEconomic and Business Review1580-04662335-42162013-12-01154293317The Question of Instability, Uncompetitiveness and Growth Slowdown of Small Middle –Income Countries in the Euro AreaMarjan SenjurThe thesis of this article is that a small country with a below-average per capita income is in a disadvantaged macroeconomic position inside the euro area. Small middle-income countries expected an acceleration of growth by joining the EMU. They were hoping to catch up in the convergence process within the euro area. Yet things turned out differently. The crisis in 2009–2012 has led to excessive instability due to exogenous macroeconomic prices and the lack of a lender of last resort for sovereign debtors. Small MICs are more vulnerable to asymmetric shocks from abroad due to the ‘one-size-fits-all’ economic policy at the EMU level. This is reflected in the excessive volatility of real economic variables (such as GDP and unemployment), and excessive financial instability (such as indebtedness) and sovereign debt. The crisis also revealed weak price competitiveness of exports due to overvalued exchange rate of the euro and overall under-average productivity of the MICs. MICs had to respond with deflationary internal (surrogate) devaluations and depressed aggregate demand. Measures of internal surrogate devaluations may partially improve situation in the medium term, yet they may worsen the competitive growth situation in the long run. A macroeconomic environment of macroeconomic instability and weak competitiveness may trigger a slowdown in growth.http://www.ebrjournal.net/ojs/index.php/ebr/article/view/253/pdf |
| collection |
DOAJ |
| language |
English |
| format |
Article |
| sources |
DOAJ |
| author |
Marjan Senjur |
| spellingShingle |
Marjan Senjur The Question of Instability, Uncompetitiveness and Growth Slowdown of Small Middle –Income Countries in the Euro Area Economic and Business Review |
| author_facet |
Marjan Senjur |
| author_sort |
Marjan Senjur |
| title |
The Question of Instability, Uncompetitiveness and Growth Slowdown of Small Middle –Income Countries in the Euro Area |
| title_short |
The Question of Instability, Uncompetitiveness and Growth Slowdown of Small Middle –Income Countries in the Euro Area |
| title_full |
The Question of Instability, Uncompetitiveness and Growth Slowdown of Small Middle –Income Countries in the Euro Area |
| title_fullStr |
The Question of Instability, Uncompetitiveness and Growth Slowdown of Small Middle –Income Countries in the Euro Area |
| title_full_unstemmed |
The Question of Instability, Uncompetitiveness and Growth Slowdown of Small Middle –Income Countries in the Euro Area |
| title_sort |
question of instability, uncompetitiveness and growth slowdown of small middle –income countries in the euro area |
| publisher |
University of Ljubljana |
| series |
Economic and Business Review |
| issn |
1580-0466 2335-4216 |
| publishDate |
2013-12-01 |
| description |
The thesis of this article is that a small country with a below-average per capita income is in a disadvantaged macroeconomic position inside the euro area. Small middle-income countries expected an acceleration of growth by joining the EMU. They were hoping to catch up in the convergence process within the euro area. Yet things turned out differently. The crisis in 2009–2012 has led to excessive instability due to exogenous macroeconomic prices and the lack of a lender of last resort for sovereign debtors. Small MICs are more vulnerable to asymmetric shocks from abroad due to the ‘one-size-fits-all’ economic policy at the EMU level. This is reflected in the excessive volatility of real economic variables (such as GDP and unemployment), and excessive financial instability (such as indebtedness) and sovereign debt. The crisis also revealed weak price competitiveness of exports due to overvalued exchange rate of the euro and overall under-average productivity of the MICs. MICs had to respond with deflationary internal (surrogate) devaluations and depressed aggregate demand. Measures of internal surrogate devaluations may partially improve situation in the medium term, yet they may worsen the competitive growth situation in the long run. A macroeconomic environment of macroeconomic instability and weak competitiveness may trigger a slowdown in growth. |
| url |
http://www.ebrjournal.net/ojs/index.php/ebr/article/view/253/pdf |
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