The EU Factor in Fat Times and in Lean: Did the EU Amplify the Boom and Soften the Bust?

Abstract

This article describes the EU's impact on economic performance in the new Member States since the advent of membership. It first deals with the EU's role in promoting the economic boom that marked the region up to 2007, emphasizing the role of the single market and of the EU in anchoring and encouraging economic policy liberalization. The second section investigates the EU role in buffering the bust that occurred after 2007, looking at structural fund spending and financial sector instruments to enhance liquidity. I argue the EU had a (mostly unintentional) pro-cyclical effect that fuelled the boom and contributed to setting up the region for a very hard fall during the bust. I also show the EU efforts to buffer the hard times were far quicker in the area of structural fund spending compared to very slow and limited innovation in liquidity provision, especially for non-eurozone states.

Overcoming ‘Economic Backwardness’ in the European Union

“…The faster the credit growth, the bigger the current account deficits, which were in turn linked to rising imports, slowing export growth and lagging competitiveness (Bakker and Gulde, , pp. 16–17; see also Jacoby, ).…”

“…New technologies are rather transposed to eastern economies intact, where moderately skilled workers labour on what are essentially assembly platforms . Whereas ‘nationally owned businesses would be concerned about these long‐term developments’ of low levels of spending on education and training (see also Jacoby, ), ‘Western headquarters do not care much about these tendencies, given their potential to relocate production in the long term’ (Nölke and Vliegenthart, , p. 687).…”

The Role of the EU in Shaping FDI Flows to East Central Europe

“…As a consequence, ECE locations became even more attractive. In sum, the EU has substantially facilitated FDI inflows to ECE but as Jacoby () shows, EU membership has contributed in several other ways to the region's improving economic performance in the early and mid‐2000s.…”

“…As Epstein () shows, the uniform application of the single market rules and the single market itself has limited economic vulnerability of the new Member States. Similarly, Jacoby () argues that while EU membership has contributed to some of the economic vulnerabilities in ECE, through structural fund spending and, to a narrower extent, with emergency liquidity measures, the EU has also tried to buffer the new Member States from the grave consequences of the crisis. In other words, without EU membership, the same level of economic internationalization would have produced greater economic decline in ECE.…”

The Impact of Institutional Quality and Efficient Cohesion Investments on Economic Growth Evidence from Italian Regions

“…Jacoby (2014) [45] claims that until 2007 the EU Structural funds had a prominent role in promoting economic growth of European regions, in particular Eastern ones. However, after the beginning of the economic crisis, their counter-cyclical effect has been very weak, especially for non-euro zone areas.…”