{
  "title": "A Commitment to Shared Prosperity: The Next Chapter of Unity in Europe",
  "publication": "IMF News, February 14, 2019",
  "sourceUrl": "https://www.imf.org/en/news/articles/2019/02/14/sp021419-a-commitment-to-shared-prosperity-the-next-chapter-of-unity-in-europe",
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  "summary": "Keynote speech by Christine Lagarde, Managing Director, International Monetary Fund, Munich, Germany, February 14, 2019.",
  "publishDate": "2019-02-14",
  "sections": [
    {
      "heading": "Introduction",
      "content": "- Keynote speech by Christine Lagarde, Managing Director, International Monetary Fund, Munich, Germany, February 14, 2019.\n- Occasion: 30th anniversary of the fall of the Berlin Wall; frames the question: Was the fall a beginning, an end, or a middle?\n- Central theme: Restarting economic convergence across Europe to preserve the political and economic promise of the EU."
    },
    {
      "heading": "I. Economic and Political Success of the European Union",
      "content": "- Historical achievements and scale:\n  - Europe’s postwar recovery since 1949 transformed into an integrated union over \"seventy years.\"\n  - The EU comprises \"over half a billion\" citizens and represents the \"second largest economy in the world.\"\n  - Including countries with free trade agreements, the trading bloc accounts for \"over one-third of global GDP.\"\n- Convergence outcomes (1993 to 2017 and beyond):\n  - Real income per person nearly doubled in the Czech Republic, Hungary, and Slovenia (1993 to 2017).\n  - Real income per person increased \"by more than two and half times\" in the Slovak Republic, Estonia, and Poland.\n  - Real income per person \"more than tripled\" in Latvia and Lithuania.\n  - From the mid-1990s to 2007: new member states’ real income per person doubled, and the original EU members saw a \"42 percent increase.\"\n- IMF role:\n  - The IMF created a new lending instrument specifically designed to address needs of former communist countries.\n- Setback:\n  - The Global Financial Crisis paused convergence as the EU prioritized survival."
    },
    {
      "heading": "II. The New Challenges to European Unity",
      "content": "- Political and social headwinds:\n  - Rise of populist movements questioning integration.\n  - Migration from the Middle East and North Africa creating cultural and security concerns.\n  - Pressure on the rules-based global trading order built over the past \"60 years.\"\n- Generational economic scars:\n  - \"1 in 4 young people in the EU are now at risk of being in poverty.\"\n- Divergence within the Euro Area:\n  - Convergence continued in central and eastern European member states, but between southern and northern Euro Area countries convergence \"started to stall over the last twenty years.\"\n  - Between \"2008 and 2017,\" for the five southern Euro Area countries hit hardest by the crisis, average annual growth in real income per person was \"actually negative.\"\n- Imperative:\n  - Restarting convergence and ensuring broad sharing of growth to restore faith in the European project."
    },
    {
      "heading": "III. Restarting Convergence Through Structural Transformation",
      "content": "- Overall approach:\n  - National reform efforts are primary; the EU can support through technical assistance, budgetary support, and fostering cooperation.\n  - Three reform areas highlighted: Labor markets, Business climate, Investing in innovation.\n\n- Labor markets — findings and recommendations:\n  - High unemployment in southern Euro Area countries:\n    - In Italy, Greece, and Spain, overall unemployment is \"between 10 and 20 percent.\"\n    - Youth unemployment in those countries is \"over 30 percent.\"\n  - Northern benchmarks:\n    - Germany and the Netherlands: overall unemployment \"below 4 percent\" and youth unemployment \"less than 7 percent.\"\n  - Constraints:\n    - Insufficient investment in education and skills training.\n    - Excessive burdens on contracting, hiring, and firing reducing employment flexibility.\n  - Policy direction:\n    - Reduce undue burdens on firms to hire and fire to unlock job prospects, especially for young workers.\n  - Example:\n    - Portugal’s labor market reforms increased willingness of firms to offer permanent contracts; \"most of the strong job growth in Portugal over the last few years is driven by jobs featuring permanent contracts.\"\n\n- Business climate — findings and recommendations:\n  - Improve attractiveness to investors and reduce barriers to competition (professional services, retail).\n  - Reduce time and cost of bankruptcy/insolvency procedures:\n    - Resolving a corporate insolvency in Greece takes \"about nine times longer than in Ireland.\"\n  - Example:\n    - Portugal reduced time to start a business from \"almost a month\" in the mid-2000s to \"less than five days.\"\n  - Policy direction:\n    - Modernize and harmonize insolvency regimes and reduce administrative barriers to cross-border investment.\n\n- Investing in innovation — findings and recommendations:\n  - Under-investment in R&D across southern Euro Area countries:\n    - R&D spending in Italy, Portugal, and Spain averaged \"just over 1 percent of GDP between 2000 to 2014.\"\n    - This is \"less than half the level of R &D spending in countries like Germany and France.\"\n  - Policy direction:\n    - Facilitate venture capital financing, improve public-private cooperation on R&D, expand public support for innovation.\n  - Potential impact:\n    - In Italy, improving firms' access to financing for innovation and expanding public support for R&D \"could raise GDP by 5 percent over the long run.\"\n    - This would translate into an increase of \"nearly 2,000 euros per year in the average workers’ real income.\"\n\n- EU’s supporting role:\n  - Provide technical assistance and advice.\n  - Devote more resources to supporting reforms and innovation in the next EU budget.\n  - Foster economic cooperation and ensure no new internal barriers, thereby building trust to accelerate politically difficult reforms (including climate commitments)."
    },
    {
      "heading": "Conclusion",
      "content": "- The fall of the Berlin Wall is characterized as simultaneously \"a beginning, a middle, and an end.\"\n- Current moment (2019) requires \"courage and creativity\" to rekindle convergence and shared prosperity.\n- If the EU recommits to its roots and shared prosperity, 2019 can mark \"the start of an optimistic new chapter in the European story.\"\n\nIMF speech text: As Prepared for Delivery by Christine Lagarde, Munich, Germany, February 14, 2019.\n\n---\n\n Content in this bundle\n\n- Staff Discussion Note (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- Christine Lagarde\n- Germany and the IMF\n- Greece and the IMF\n- Italy and the IMF\n- Portugal and the IMF\n- Spain and the IMF\n- Speeches\n- PRESS CENTER\n- continent’s next generation which is still suffering from the economic\nscars of the global financial crisis\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2019/02/14/sp021419-a-commitment-to-shared-prosperity-the-next-chapter-of-unity-in-europe"
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    "Published: February 14, 2019",
    "Keynote speech by Christine Lagarde, Managing Director, International Monetary Fund, Munich, Germany, February 14, 2019.",
    "Occasion: 30th anniversary of the fall of the Berlin Wall; frames the question: Was the fall a beginning, an end, or a middle?",
    "Central theme: Restarting economic convergence across Europe to preserve the political and economic promise of the EU.",
    "Historical achievements and scale:",
    "Convergence outcomes (1993 to 2017 and beyond):",
    "IMF role:",
    "Setback:",
    "Political and social headwinds:",
    "Generational economic scars:",
    "Divergence within the Euro Area:",
    "Imperative:",
    "Overall approach:",
    "Labor markets — findings and recommendations:",
    "Business climate — findings and recommendations:",
    "Investing in innovation — findings and recommendations:",
    "EU’s supporting role:",
    "The fall of the Berlin Wall is characterized as simultaneously \"a beginning, a middle, and an end.\"",
    "Current moment (2019) requires \"courage and creativity\" to rekindle convergence and shared prosperity.",
    "If the EU recommits to its roots and shared prosperity, 2019 can mark \"the start of an optimistic new chapter in the European story.\"",
    "[Staff Discussion Note (PDF)](/external/pubs/ft/sdn/2014/sdn1411.pdf){rel=\"external\" type=\"application/pdf\"}",
    "[Christine Lagarde](https://www.imf.org/en/About/senior-officials/Bios/christine-lagarde)",
    "[Germany and the IMF](http://www.imf.org/external/country/DEU/index.htm)",
    "[Greece and the IMF](http://www.imf.org/external/country/GRC/index.htm)",
    "[Italy and the IMF](http://www.imf.org/external/country/ITA/index.htm)",
    "[Portugal and the IMF](http://www.imf.org/external/country/PRT/index.htm)",
    "[Spain and the IMF](http://www.imf.org/external/country/ESP/index.htm)",
    "[Speeches](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[continent’s next generation which is still suffering from the economic",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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