IMF European Department Director Marek Belka, a former Polish premier, draws lessons from the global economic crisis for reformers in eastern Europe.
In our highly globalized economy, large and rapid flows of money across borders are here to stay. The challenge for emerging economies is to find ways to manage these flows so that they don’t exacerbate boom-bust cycles, while still leaving the door open to productive (and hopefully stable) investment. This means using all available tools, particularly greater use of prudential regulations, and keeping an open mind when it comes to capital controls.
The release of a paper by the IMF called "Rethinking Macroeconomic Policy" has attracted instant reaction and a lot of comment. Paul Krugman supported the idea of targeting higher average inflation, but said he was surprised that the Fund was allowing him to say so publicly. Others said inflation was not the solution.
Following the global economic crisis, Europe's emerging economies will need to find new sources of growth to increase their share of world markets. Marek Belka, head of the IMF's European Department, says growth will need to come from manufacturing and services, rather than, in the past, construction, real estate, and banking. But he argues that Emerging Europe has transformed itself many times before and is quite capable of doing it again.
The conventional wisdom is that, when the seas get rough, it’s better to be in a big boat. But being in the European Monetary Union (EMU) hasn’t exactly been smooth sailing for all its members. On the contrary, the crisis has highlighted that sound policy frameworks are more important than ever. I look at this experience from the perspective of the European Union’s new member states in the East, who are still outside the EMU but are set to join sooner or later.