(European Economy. Occasional Papers. 62. June 2010.
Brussels. Internet only. 57pp. Tab. Graph. Ann. Bibliogr. Free.)
KC-AH-10-062-EN-C ISBN: 978-92-79-15075-3 ISSN: 1725-3195
Candidate and potential candidate countries demonstrated a high degree of initial resilience to the global economic crisis, even though they had appeared ex ante more vulnerable than the new EU Member States, in view of their large external deficits prior to 2008 and hence their reliance on foreign capital to finance their growth.
While the crisis nevertheless took a heavy toll on growth, they were broadly able to withstand pressure and successfully avoid worst-case meltdown scenarios. It was obvious that the limited room for manoeuvre offered by the macro-economic policy mix - both on the monetary and the fiscal policy side - in most of the pre-accession countries would not allow the kind of full fledged crisis response policies that were pursued in the EU. As global liquidity dried out in 2008, the region's growth engine appeared dramatically challenged, with fears that a possible "sudden stop" of capital inflows could trigger a very severe macro-economic adjustment and jeopardise macro-financial stability.
The publication attempts to gain a more in-depth understanding of the main structural vulnerabilities of the pre-accession countries and the main channels of development of the crisis, policy response attempts to weather its effects, and finally some of the challenges for the years ahead. While long-term convergence with EU wealth levels remains a legitimate objective, a new and more sustainable growth model - relying less on external capital inflows to finance growth, but more on intrinsic competitiveness of their economies - may have to emerge as pre-accession countries exit the crisis.