Publications > Publications > Working Papers > The need for good governance

Policy Brief No. 1

Karl Aiginger, Olaf Cramme, Stefan Ederer, Roger Liddle & Renaud Thillaye, Reconciling the short and the long run: governance reforms to solve the crisis and beyond, WWWforEurope Policy Brief No. 1, September 2012


Research papers to download

Renaud Thillaye, The challenges of EU governance and the quest for long-term growth, WWWforEurope Working Paper No. 4, February 2013

Petr Rozmahel, Ludek Kouba, Ladislava Grochová & Nikola Najman, Integration of Central and Eastern European Countries: Increasing EU Heterogeneity?, WWWforEurope Working Paper No. 9, June 2013

Claudia Busl & Marcus Kappler, Does Foreign Direct Investment Synchronise Business Cycles? Results from a Panel Approach, WWWforEurope Working Paper No. 23, July 2013

Andreas Sachs & Frauke Schleer, Labour market performance in OECD countries: A comprehensive empirical modelling approach of institutional interdependencies, WWWforEurope Working Paper No. 7, June 2013

Claudia Busl & Atilim Seymen, (Spillover) Effects of Labour Market Reforms in Germany and France, WWWforEurope Working Paper No. 8, June 2013

Good governance is needed to for innovation, growth and sustainability

Europe is going into its sixth year of crisis and at the most very moderate growth. This is in part due to insufficient macroeconomic coordination and policies which may have stabilised the Monetary Union for the time being, but do not seem sustainable. The convergence success story of Europe seems to have come to an abrupt halt if not even to a reversal. The strong bias on market-based adjustment has imposed strong downward social pressures, technocracy prevails and European governments at national and supra-national level are losing the trust of their people.

WWWforEurope already named much needed goals for governance reforms in its first policy brief , "Reconciling the short and the long run: governance reforms to solve the crisis and beyond", by Karl Aiginger, Olaf Cramme, Stefan Ederer, Roger Liddle and Renaud Thillaye. Governance reforms should address and promote the objectives of increasing sustainable growth and employment, of improving the stability and resilience of the economy, of closing the gaps in productivity, wages, equality, and wealth, of closing the disequilibria in budget and current accounts, and – as a meta theme – promote the transition to a smarter and more sustainable and inclusive European model.

Since the publication of this policy brief much more valuable in-depth research has been conducted on the key aspects of governance structures and institutions at the European level, especially on EU institutions and labour market institutions.

 

Renaud Thillaye assesses the Europe 2020 Strategy. He finds that, though a compromise, Europe 2020 can be seen as a well articulated vision and a baseline to EU policy makers. Nevertheless political governance does not support this vision: It is too much focused on short-termism and on market-based adjustment policies. Thillaye recommends to view Europe 2020 not as a "good weather strategy" only but instead policy makers should use it to try to reconcile short-term and long-term objectives, macroeconomic policies with social goals and to implement more proactive strategies against the risks of global competition.

 

Petr Rozmahel and his colleagues from the Mendel University in Brno asked the question whether the integration of CEE countries has further increased EU heterogeneity. They found that macroeconomic policies were less decisive for a successful transition than political stability, the quality of institutional framework, as well as the maturity and compatibility of informal institutions. They draw an analogy to the Southern peripheral states: Although sound fiscal policies are important, it is more important for governments and elites to formulate and support positive long-term visions on a broad political and social consensus.

 

The efficiency of a common monetary policy depends highly on the question whether business cycles in member countries move synchronically. Claudia Busl and Marcus Kappler explore the question whether trade integration supports this synchronization. They find that beneficial effects are less robust than expected. On the other hand, policies promoting foreign direct investment seem to close the gap in differences in sector structures and are therefore positive or at least not detrimental to the needed synchronization of business cycles.

 

Unemployment in Europe is much too high. What are best practices in institutional reforms to fight unemployment? Andreas Sachs and Frauke Schleer show that there is no "one size fits all"-model. Instead the labour market impact of institutional changes differs across countries as well as between genders. While a reduction in labour taxes seems to be beneficial in almost all countries, lowering of unemployment benefits or protection is much less likely to have the expected consequences derived from textbook economics.

 

Claudia Busl and Atilim Seymen on the other hand compare German and French labour markets and find in their model that the implementation in France of some of the German labour market reforms of the 2000s could bring about beneficial effects for both the French and the German labour market.