{
  "title": "Growing Pains: Europe's Dilemma",
  "publication": "IMF Blog, October 21, 2011",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2011/10/21/growing-pains-europes-dilemma",
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  "summary": "Growth rates in the past decade ranged from close to zero in Italy and Portugal to more than 4 percent in the best performers.",
  "sections": [
    {
      "heading": "Divergent per capita GDP growth in Europe",
      "content": "- Growth rates in the past decade ranged from close to zero in Italy and Portugal to more than 4 percent in the best performers.\n- Some countries grew much slower or faster than expected given their income level (convergence only part of the story): Italy and Portugal grew slower than expected; the Slovak Republic and Sweden grew faster."
    },
    {
      "heading": "Role of convergence and other factors",
      "content": "- Convergence: poorer countries can grow faster by importing technology; richer countries at the technology frontier can only grow faster through innovation.\n- Convergence does not fully explain differences in growth performance across European countries."
    },
    {
      "heading": "Integration into the global economy",
      "content": "- Better-performing countries are much more integrated into the world economy than poor performers.\n- Strong performers experienced high and increasing levels of trade (both exports and imports); many poor performers have lower and stagnating levels.\n- Examples:\n  - In Austria, Germany, the Netherlands, and Sweden, the share of export and import in GDP rose by about 15 percent to more than 20 percent between 1995 and 2010.\n  - The Czech and Slovak Republics, and to a lesser extent Poland, saw similar increases.\n  - Greece, Italy, Portugal, and Spain experienced stagnation in export-to-GDP and import-to-GDP ratios over those years."
    },
    {
      "heading": "How to recover from \"euro sclerosis\"",
      "content": "- Historical precedent: late 1970s and early 1980s episodes of “euro sclerosis” (high unemployment and low growth) show policy change can reverse decline.\n- Case studies: the Netherlands and Sweden in the 1980s and 1990s\n  - Both countries undertook sweeping reforms after prolonged malaise and crisis.\n  - Conditions before reform: income per capita falling relative to Germany for about a decade; deteriorating public finances; growing fiscal deficits.\n  - Country-specific constraints:\n    - Netherlands: rising unemployment driven by high real wage costs.\n    - Sweden: poor-performing traditional industries, the banking crisis in the early 1990s, and stifling taxes.\n  - Policy responses:\n    - Netherlands: wage agreement between employers and unions as the centerpiece to restore employment; additional tax and benefit reforms to create jobs and encourage labor force participation; reduced regulation to allow new companies and industries to flourish.\n    - Sweden: fiscal consolidation, tax reform, clean up of the banking sector, overhaul of the wage bargaining system; reduced regulation to foster new companies and industries.\n  - Outcomes: reforms spanned more than a decade and took time to yield full benefits; per capita income in both the Netherlands and Sweden is now significantly higher than even that of Germany."
    },
    {
      "heading": "Lessons and policy recommendations for current poor performers",
      "content": "- Reforms work—but they take time.\n  - It takes time to implement reforms, time before their impact becomes visible (initial deterioration possible), and time before full benefits accumulate.\n- Address both macroeconomic imbalances and barriers to growth.\n  - If deficits and debt are not brought under control, growth is unlikely to pick up.\n  - Correcting macroeconomic imbalances alone, without removing growth barriers, will not result in sustained high growth.\n- Reform priorities evolve over time.\n  - As initial bottlenecks are removed, new constraints become binding and require sequential policy attention.\n\nSource: Growing Pains: Europe's Dilemma (October 21, 2011).\n\n---\n\n\n References\n\n- Europe\n- growth in Europe\n- https://www.imf.org/wp-content/uploads/2011/10/fig1.jpg\n- https://www.imf.org/wp-content/uploads/2011/10/fig2.jpg\n- https://www.imf.org/wp-content/uploads/2011/10/europe-oct-21-fig3.jpg\n- https://www.imf.org/wp-content/uploads/2011/10/fig4.jpg\n\nSource: https://www.imf.org/en/blogs/articles/2011/10/21/growing-pains-europes-dilemma"
    }
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    "Authors: innovation.",
    "Published: October 21, 2011",
    "Growth rates in the past decade ranged from close to zero in Italy and Portugal to more than 4 percent in the best performers.",
    "Some countries grew much slower or faster than expected given their income level (convergence only part of the story): Italy and Portugal grew slower than expected; the Slovak Republic and Sweden grew faster.",
    "Convergence: poorer countries can grow faster by importing technology; richer countries at the technology frontier can only grow faster through innovation.",
    "Convergence does not fully explain differences in growth performance across European countries.",
    "Better-performing countries are much more integrated into the world economy than poor performers.",
    "Strong performers experienced high and increasing levels of trade (both exports and imports); many poor performers have lower and stagnating levels.",
    "Examples:",
    "Historical precedent: late 1970s and early 1980s episodes of “euro sclerosis” (high unemployment and low growth) show policy change can reverse decline.",
    "Case studies: the Netherlands and Sweden in the 1980s and 1990s",
    "Reforms work—but they take time.",
    "Address both macroeconomic imbalances and barriers to growth.",
    "Reform priorities evolve over time.",
    "[Europe](http://www.imf.org/external/pubs/ft/survey/so/2011/CAR100611A.htm)",
    "[growth in Europe](http://www.imf.org/external/pubs/ft/reo/2011/eur/eng/ereo1011.htm)",
    "[https://www.imf.org/wp-content/uploads/2011/10/fig1.jpg](https://www.imf.org/wp-content/uploads/2011/10/fig1.jpg)",
    "[https://www.imf.org/wp-content/uploads/2011/10/fig2.jpg](https://www.imf.org/wp-content/uploads/2011/10/fig2.jpg)",
    "[https://www.imf.org/wp-content/uploads/2011/10/europe-oct-21-fig3.jpg](https://www.imf.org/wp-content/uploads/2011/10/europe-oct-21-fig3.jpg)",
    "[https://www.imf.org/wp-content/uploads/2011/10/fig4.jpg](https://www.imf.org/wp-content/uploads/2011/10/fig4.jpg)"
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