A few weeks ago, The Economist published an article on economic governance that discussed the importance of public sector accounting. It recognized the importance of maintaining existing public-sector assets and investment in new ones. These assets, according to an IMF study, account for a significant portion of GDP. But, the article asserts, filling potholes and repairing bridges are not as politically appealing as flashy new infrastructure, and few economies engage in robust public-sector accounting that demonstrates the net worth of these assets.
Maybe if governments and citizens understood the value of their public assets, they’d be inclined to invest in their maintenance – avoiding waste and even catastrophic accidents when poor infrastructure fails?
Economic growth does not evenly spread within countries: some regions benefit, while other regions lag behind. This is as true in the European Union (EU) as in most other parts of the world, despite significant convergence efforts in the EU. The leading regions in Europe have, on average, 2.3 times the GDP per capita of their poorest counterparts.
There are 5 things you (probably) didn’t know about the phenomenon of “lagging regions” within the EU.
The entry into force of the WTO Trade Facilitation Agreement on February 22 is a remarkable achievement. The TFA spearheads a global effort to reduce trade costs, helping countries to connect to the global economy. This is particularly relevant for low-income countries who need trade to reduce poverty and nevertheless face costs that are on average three times higher than those of advanced economies.
This blog originally appeared in the Brookings Institute blog on December 7, 2016.
As 2016 draws to a close, few questions are asked with greater urgency in Europe than this: How can countries tackle inequality? Education usually tops the list of most promising solutions to inequality between rich and poor or between advanced and lagging regions. Education equips children and youth, regardless of their social background, with the skills to get a good job. As such, it is an engine of social mobility. So goes the theory. But what about the practice?
The performance by new members of the European Union (EU) in achieving greater development impact and faster convergence is a key concern at the EU level. EU funds can contribute to the modernization of public infrastructure and public administration, and they are also estimated to have a net positive impact on the economy. A World Bank report, prepared for the Ministry of Regional Development and Public Administration, highlights that for every €1 invested in public infrastructure projects in Romania, an additional €2.04 are generated by the economy – a relatively high impact.
Romania’s absorption performance leaves much to be desired; with the exception of Croatia, Romania has registered the worst level of absorption in the Union when compared to other new member states.
The world's greatest risks can't be confined within borders. This is clearly the case with the ongoing refugee crisis, which is unprecedented in scale and affecting people and places far from the scene of civil war, fragility and conflict. The UK vote to leave the European Union showed, in part, the volatility and reach of the impact of forced displacement.
When development practitioners such as ourselves think of poverty, the EU is not what comes to mind first. While it is true that average incomes are higher in Europe than in most regions of the world, it is also true that the 2008 global financial crisis had a huge impact on the welfare of the most vulnerable in many countries in the region.
Over the past several years much has been written about the significant potential for solar energy generation in the Middle East and North Africa, where there is no shortage of sunshine. The International Energy Agency estimated that the potential from concentrated solar power technology alone could amount to 100 times the electricity demand of North Africa, the Middle East and Europe combined.
In the wake of commitments at the Paris climate conference (COP21), it is time to develop this rich source of low-carbon energy sitting close to Europe’s southern shores, and bolster efforts to agree on a framework to import clean, sustainable energy from North Africa.
As recently as 2012 there have been efforts to adopt a framework that would allow importing renewable energy from Morocco to Germany—through France and Spain—but electricity trade between countries typically becomes reality when there are economic benefits for all sides. Electricity trade has the added benefit of fostering closer political ties.
Expanding regional trade between North Africa and Europe has also been hindered by inadequate physical electrical connections between the two continents and poor physical integration in European electricity grids. There is currently only one electrical transmission interconnection between North Africa and Europe, namely the Morocco-Spain connection. Further, Spain’s interconnection with the rest of Europe is limited, with no new transmission projects undertaken to expand this capacity for the past three decades. At the same time, Spain had excess generation capacity because of the economic downturn experienced in Europe over the past several years. That made impractical the notion of allowing North African renewable energy into the Spanish market. Italy, another potential electricity gateway from North Africa, was in a similar situation.
Few of the challenges that have plagued Europe this century have been resolved. Government spending and debt are up, yet potential growth is weak. Fixed investment has declined substantially to lows not seen in decades. Medium-term risks are elevated, but with fiscal space greatly reduced and with monetary policy in unconventional territory, policymakers have precious little ammunition to tackle any future shocks.
Investing in people starts by ensuring that graduates leave school with strong basic/foundational skills, such as in reading and mathematics. Such skills are critical for subsequent study, for quickly finding a first job, and for adapting to continuous technological change. But are countries in the EU ready to face that challenge?