nep-eec New Economics Papers
on European Economics
Issue of 2013‒02‒16
nine papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Sovereign Contagion in Europe: Evidence from the CDS Market By Paolo Manasse; Luca Zavalloni
  2. Debt Restructuring and Economic Prospects in Greece By William R. Cline
  3. Slovakia: A Catching Up Euro Area Member In and Out of the Crisis By Jarko Fidrmuc; Caroline Klein; Robert Price; Andreas Wörgötter
  4. A New Strategy for the European Periphery By Karl Aiginger
  5. Capital Prices and Eurozone Competitiveness Differentials By Askenazy, Philippe
  6. Structural and technological change in the European periphery: The case of Portugal By Argentino Pessoa
  7. Will Europe Face A Lost Decade? A Comparison With Japan's Economic Crisis By Christoph A. Schaltegger; Martin Weder
  8. Does social capital matter for European regional growth? By Jesús Peiró-Palomino; Anabel Forte Deltell
  9. The Dutch Labour Market: Preparing for the Future By Mathijs Gerritsen; Jens Høj

  1. By: Paolo Manasse (University of Bologna, Italy); Luca Zavalloni (University of Warwick, UK)
    Date: 2013–01
  2. By: William R. Cline (Peterson Institute for International Economics)
    Abstract: Severe recession in 2010–12 drove the need for sovereign debt reduction in Greece, despite a massive cut in government spending. The 2012 restructuring cut privately-held debt by about 50 percent, but much debt was exempt (IMF, euro area governments, ECB), and new borrowing was needed to recapitalize banks. In December an official sector package of lower interest rates, buybacks, and remittance of ECB profits on Greek bonds boosted total relief by about one third. Nonetheless, even under favorable conditions the ratio of debt to GDP is unlikely to be much below 120 percent by 2020, limiting market access for a country that has restructured with deep haircuts. Although Greek borrowing needs are now covered for several years, more relief from the official sector thus seems likely to be needed in the future.
    Date: 2013–02
  3. By: Jarko Fidrmuc; Caroline Klein; Robert Price; Andreas Wörgötter
    Abstract: The Slovak economy experienced a strong but short recession in 2009. The recovery afterwards was driven by exports and investment. While GDP growth was one of the strongest in OECD, employment did not reach the pre-crisis level and unemployment remains stubbornly high. This paper argues that Slovakia joined the euro area after a period of unprecedented real appreciation, which generated a threat for competitiveness of its export-oriented manufacturing industry. The response combined internal devaluation with productivity increasing measures, including capital deepening and laying off low productivity workers. While this strategy was successfully restoring an external equilibrium, its consequences for domestic demand and employment are less positive. This development is compared with Estonia and Slovenia, two other small and very open economies, recently entering the euro area.<P>Slovaquie : Un membre de la zone euro en rattrapage pendant et après la crise<BR>En 2009, l'économie slovaque a connu une récession forte mais de courte durée. Par la suite, la reprise a été tirée par les exportations et l'investissement. Alors que la croissance du PIB a été l'une des plus fortes de l'OCDE, l'emploi n'a pas atteint le niveau d'avant la crise et le chômage reste durablement élevé. Cet article soutient que la Slovaquie a rejoint la zone euro après une période d'appréciation réelle sans précédent qui a généré une menace pour la compétitivité de son industrie exportatrice. La réponse a consisté en une dévaluation interne combinée à des mesures augmentant la productivité, comprenant entre autres l'accroissement de l’intensité capitalistique et le licenciement des travailleurs à faible productivité. Bien que cette stratégie ait permis la restauration d'un équilibre extérieur, ses conséquences sur la demande intérieure et l'emploi sont moins positives. Ce processus est comparé avec ceux observés en Estonie et Slovénie, deux autres petites économies très ouvertes, récemment entrées dans la zone euro.
    Keywords: Slovakia, Slovenia, Estonia, crisis, job-less recovery, domestic demand, Slovaquie, Slovénie, Estonie, crise, reprise sans l'emploi, demande intérieure
    JEL: E20 F41 G01
    Date: 2013–02–05
  4. By: Karl Aiginger (WIFO)
    Abstract: The southern European periphery suffered a severe setback in its catching-up process versus Western Europe after the financial crisis with GDP dropping by 10% between 2008 and 2012 and unemployment rates increasing to 20% for Greece, Portugal and Spain. We analyse first the reason for this setback, and then the policy reaction of the national governments and the European partners. Policy reactions mainly focused on restoring price competitiveness. It has important blind spots as far as industrial restructuring, upgrading tourism, making use of globalisation and alternative energies, supporting business starts, connecting education, as well as innovation and firm creation are concerned. There is a lack of national ownership of the reforms on the one hand, and a neglect of the European community and the surplus countries on the other hand, that they could support the southern periphery by measures increasing welfare in the community as well as in the surplus countries. Surplus countries profit heavily by the bifurcation of interest rates for government bonds and by capital flows.
    Date: 2013–02–04
  5. By: Askenazy, Philippe
    Abstract: Competitiveness differentials are blamed for the instability of the Eurozone. Most of the analyses focus on labour costs or labour‐market institutions. This paper explores an additional source of differentials in competitiveness: land and building prices. European countries, especially France, have experienced a significant rise in property prices since the beginning of the century. Germany is an exception. A large increase in the prices of buildings, structures and lands for private companies can be also observed in some countries. Higher prices impede firm competitiveness in at least two ways: a) investments are more costly; b) the increasing value of non‐financial assets should translate into higher equity value and thus incite firms to increase dividends so as to preserve firm owners’ direct remuneration. French national accounts provide rich information for exploring these mechanisms. We show that the nominal value of buildings, structures and land owned by non‐financial corporations dramatically increased relative to their value added, well above their historical observations. We argue that, in France, non‐financial corporations (NFCs) pay a large supplementary cost for their investments and have to distribute massive additional dividends. The yearly charge counts for at least 4% of their value added.
    Keywords: Eurozone; competitiveness; non‐financial asset prices; housing bubble
    JEL: E22 E31 J30
    Date: 2013–02
  6. By: Argentino Pessoa (CEF.UP and NIFIP, Faculdade de Economia, Universidade do Porto)
    Abstract: In the past Portugal managed to grow at a significant rate, but the pace has getting slower and slower from decade to decade, until becoming practically stagnant in the first decade of the 21st century. This stumpy growth together with the current debt crisis has fed the rhetoric of structural reforms in a so obsessive way as if they are a panacea. Our paper shows how structural change was occurred in the Portuguese economy and how it began to be transformed in technological change in the beginning of the 21st. century and argues that structural change and structural reform are two very different concepts and using the latter as a magic potion is more detrimental than beneficial of economic growth and structural change.
    Keywords: Catching-up; crisis; EMU; peripheral countries; Portuguese economy; structural change; structural reforms; technological change.
    JEL: O30 O32 O33 O38 O43 O47 O52
    Date: 2013–02
  7. By: Christoph A. Schaltegger; Martin Weder
    Abstract: After more than five years have passed since the start of the global financial crisis, many European countries are still suffering from financial instability, surging sover- eign debt, economic stagnation or decline, high unemploym ent and political turmoil. We compare consequences and policy measures during Europe?s current crisis with those in Japan in the 1990s after the burst of a real estate and asset price bubble. We show that despite marked differences, there are many simila rities both in eco- nomic outcome and policy reactions. Given the complexity, severity and persistence of Europe?s multiple crises, the threat of a Lost Decade similar to the one Japan has witnessed may not be unlikely. The paper concludes by presenting some of the les- sons learned from Japan and Europe.
    Date: 2013–02
  8. By: Jesús Peiró-Palomino (Department of Economics, Universitat Jaume I, Castellón, Spain); Anabel Forte Deltell (Department of Economics, Universitat Jaume I, Castellón, Spain)
    Abstract: This article analyzes the role of different elements of social capital in economic growth for a sample of 85 European regions during the period 1995 - 2008. Much has been said about social capital in the last two decades, but studies for the European regional context are scant, and those analyzing periods after the nineties are nonexistent. The improvements in data availability allow us to consider the traditionally disregarded Central and Eastern European regions. This is especially interesting, since they are all transition economies that recently joined to the European Union and show remarkably low levels of social capital. Additionally, we follow the Bayesian paradigm, which not only allows us to make direct inference on the parameters to be estimated, but also deals with parameter uncertainty, leading to a deeper understanding of the data. Contrary to other contributions for the European context, results suggest, among other findings, that trust and social norms might have the major implications for regional growth, whereas the role of active participation in groups does not seem to be so well defined.
    Keywords: Social capital, economic growth, European regions, Bayesian inference
    JEL: C15 R10 Z13
    Date: 2013
  9. By: Mathijs Gerritsen; Jens Høj
    Abstract: The well performing labour market has delivered low unemployment and relatively stable wage developments. However, it is divided into a small flexible segment and a large more rigid segment, where the adjustment burden of external shocks falls disproportionally on the first group. At the same time, labour utilisation is relatively low, despite a relatively high overall participation rate, due to a high frequency of part-time employment, a low effective retirement age and a high use of disability benefits. Looking ahead, it is unlikely that the organisation of the labour market will allow the economy to continue reaping fully the benefits of globalisation. That would require a labour market that facilitates the allocation of increasingly scarce labour resources to their best use and mobilises underutilised labour resources to counter the ageing related contraction of the labour force.). This Working Paper relates to the 2012 OECD Economic Survey of the Netherlands (<P>Le marché du travail néerlandais : Préparer l'avenir<BR>Le bon fonctionnement du marché du travail a permis de maintenir un faible niveau de chômage et des évolutions salariales relativement stables. Cependant, ce marché est divisé en un grand segment assez rigide et un petit segment flexible, sur lequel pèse de façon disproportionnée la charge de l'ajustement en cas de chocs extérieurs. En outre, l'utilisation de la main-d'oeuvre est faible, malgré un taux d'activité global relativement élevé, en raison de la grande fréquence de l'emploi à temps partiel, d'un faible âge effectif de départ à la retraite et d'un recours important aux prestations d'invalidité. À terme, il est peu probable que l'organisation du marché du travail permettra à l'économie de continuer à tirer pleinement parti de la mondialisation. Il faudrait pour cela un marché du travail qui facilite la réallocation des ressources de main-d'oeuvre de plus en plus rares vers leur meilleure utilisation et mobilise les ressources de main-d'oeuvre sous-utilisées pour contrer la contraction de la population active liée au vieillissement. Ce document de travail se rapporte à l'Étude économique des Pays-Bas de 2012 (
    Keywords: globalisation, labour market policies, severance pay, labour market, wage formation, allocation of the labour supply, marché du travail, politique du marché du travail, mondialisation, formation des salaires, répartition de l'offre de travail, indemnités de départ
    JEL: J08 J3 J62 J65
    Date: 2013–01–14

This nep-eec issue is ©2013 by Giuseppe Marotta. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.