Thursday, July 7, 2022 at 14:00-15:30 Vienna time (CEST)
István P. Székely, Principal Advisor, DG Economic and Financial Affairs, European Commission, and Honorary Professor, Corvinus University of Budapest
Hervé Joly, Director, Joint Vienna Institute
The 2022 JVI Annual Lecture analyzed the economic trajectories and convergence process of countries in Central and Eastern Europe in the past 30 years. Eleven of these countries joined the European Union (EU) in three consecutive waves since 2004. The impact that joining the EU had on these 11 countries (the “EU-11”) was the focus of István P. Székely’s presentation, which was based on a book he recently edited on the topic.
Székely started by presenting his analytical framework. Convergence is defined as the journey to the EU’s frontier of economic, social, and institutional development. Channels through which integration to the EU operates include trade, foreign investment, finance, migration, knowledge, and institutions; these channels often interact (e.g., foreign investment might increase export capacity and reduce migration). Two “super dimensions” are also considered: fairness and sustainability.
The broad picture is one of fast economic convergence of the EU-11, particularly in the 2000s. Social/human development convergence also occurred, but the EU-11 look less exceptional in this area when compared to other regions in the world. Trade and foreign investment have been two powerful channels, unlike domestic finance. Rapid economic convergence did not prevent the EU-11 from experiencing high emigration and a significant population decline, with nevertheless very diverse developments across countries. Institutional quality convergence occurred, but at a slower pace than economic convergence. On fairness and sustainability, the trajectories varied also significantly across countries, with some experiencing a large increase in inequalities.
Székely ended his presentations with lessons for future EU members. EU membership is a great opportunity for accelerating economic, social, institutional, and environmental convergence. But it is up to countries to turn this opportunity into reality, for instance by:
The ensuing discussion with the audience revolved around: the scope for improving macro-prudential frameworks in the region to harness finance better in the convergence process; environmental convergence in the EU-11; the linkages between institutional quality and growth; and the reasons for low progress, or setbacks, in institutional quality convergence in some EU members.
Hervé Joly, Director, JVI