PERC/LO-N Regional Project – Tackling Taxation, Informal PERC/LO-N Regional Project – Tackling Taxation, Informal Economy and Corruption in the Western Balkans – towards better Economy and Corruption in the Western Balkans – towards better

governance and democratic processgovernance and democratic processKick-off regional meetingKick-off regional meeting

12 - 15 March 2013, Sofia12 - 15 March 2013, Sofia

Current challenges and possibilities for changes

Bruno S. SergiUniversity of Messina & ETUI

Some key issues in perspectiveSome key issues in perspective

Terrific expectations about EU membership in

terms of social improvement and economic

growth

Today’s economic crisis

Relevant ChallengesRelevant Challenges

SEE TU economic experts’ network has already identified several relevant

challenges and problems:• Unsustainable reduction in wages and pensions;

• Growing inequality and injustice in the distribution of wealth;

• A strict conditionality of the IMF and other international institutions, while governments often

misuse IMF’s support thereby concealing bad national strategies and policies;

• Labour market difficulties and uncertainty regarding who should be in charge of job creation;

• Amendments to and passing of new labour laws have reduced workers’ rights, wages and

fundamental standards of decent work.

Southeast Europe, Data at a GlanceSoutheast Europe, Data at a Glance

Country Population (end-year,

million)

Real GDP change, in % 2011

GDP per capita at PPP (euros) 2011

Annual inflation rates (consumer

prices), 2011

Albania 3.2 3.0 6,800 3.4

Bosnia and Herzegovina 3.8 1.3 6,800 3.7

Croatia 4.4 0.0 15,100 2.3

Kosovo 2.1 5.0 5,080 (b) 7.3

FYR Macedonia 2.1

 

3.1 9,200 3.9

Montenegro 0.6 2.4 10,500 3.1

Serbia 7.3 1.6 8,800 1.1

         

Germany 81.8 3.1 28,700 2.5

Greece 10.8 –6.9 21,500 3.3

Poland 38.1 4.3 15,300 4.3

EU-27 501 1.5 24,400 3.1

Annual Growth Rates for Industry Annual Growth Rates for Industry

Country 2008 2009 2010 2011

Albania 8.7% 10.6% 18.6% 10.0%

Bosnia and Herzegovina 7.3% 1.5% 3.7% 5.6%

Croatia 1.2% -9.2% -1.4% -1.2%

FYR Macedonia 5.1% -8.7% -4.8% 3.3%

Montenegro -2.0% -32.2% 17.5% -10.3%

Serbia 1.4% -12.6% 2.5% 2.1%

         

Germany (a) -0.1% -16.3% 10.9% 7.6%

Greece (a) -4.2% -9.2% -6.6% -8.1%

Poland (a) 2.4% -3.7% 10.8% 7.2%

EU-27 (a) -1.8% -13.7% 6.8% 3.2%

Inward FDI Stock, as a percentage of GDPInward FDI Stock, as a percentage of GDP

Country 2000 2005 2010

Albania 6.78 12.48 36.67

Bosnia and Herzegovina 19.66 27.54 42.50

Croatia 13.10 32.74 56.68

FYR Macedonia 15.05 35.88 47.98

Montenegro – – 138.18

Serbia – – 46.51

Montenegro + Serbia 8.87 20.03 –

Ranking on the Ease of Doing BusinessRanking on the Ease of Doing Business

Country Doing Business 2013 Rank Doing Business

2012 Rank

 

FYR Macedonia 23 22

Montenegro 51 57

Croatia 84 80

Albania 85 82

Serbia 86 95

Kosovo 98 126

Bosnia and Herzegovina 126 125

   

Germany 20 18

Greece 78 89

Poland 55 74

Global competitiveness Global competitiveness indexindex

Country Rank 2012-2013Switzerland 1Singapore 2Germany 6USA 7UK 8Honk Kong 9Japan 10China 29Poland 41Russia 67Croatia 81Bosnia and Herzegovina 88Albania 89Serbia 95Greece 96Source: World Economic Forum, The Global Competitiveness Report 2012-2013, available at <http://reports.weforum.org/global-competitiveness-report-2012-2013/>.

Economic Freedom Ranking

  World Rank

2012

World Rank

2011

Germany 26 [71] 23 [71.8]

FYR Macedonia 43 [68.5] 55 [66]

Albania 57 [65.1] 70 [64]

Poland 64 [64.2] 68 [64.1]

Montenegro 72 [62.5] 76 [62.5]

Croatia 83 [60.9] 82 [61.1]

Serbia 98 [58] 101 [58]

Greece 119 [55.4] 88 [60.3]

Bosnia and Herzegovina 104 [57.3] 104 [57.5]

Economic Freedom RankingEconomic Freedom Ranking  World Rank

2012

Germany 26 [71]

Albania 57 [65.1]

Poland 64 [64.2]

Croatia 83 [60.9]

Bosnia and Herzegovina 104 [57.3]

China 138 [51.2]

Syria 139 [51.2]

Russia 144 [50.5]

Note: freedom scores are in [.]: 100 - 80: free; 79.9 - 70: mostly free; 69.9 - 60: moderately free; 59.9 - 50: mostly not free; 49.9 - 0: repressed.Source: The Heritage Foundation (in partnership with The Wall Street Journal).

Knowledge Indexes Knowledge Indexes Rank   Country 2009 Knowledge Economy

index

2009 Knowledge Index

1 +2 Denmark 9.52 9.49

12 +3 Germany 8.96 8.92

27 +3 Hungary 8.00 7.88

37 -2 Poland 7.41 7.38

38 -7 Greece 7.39 7.58

40 +4 Croatia 7.28 7.28

43 +8 Bulgaria 6.99 6.94

47 +13 Romania 6.43 6.25

53 +20 Serbia 5.74 6.32

58 +14 FYR Macedonia 5.58 5.66

79 +7 Bosnia and Herzegovina 4.58 4.68

93 +10 Albania 3.96 3.92

EBRD Index for Banking Sector Reform and Interest EBRD Index for Banking Sector Reform and Interest Rate LiberalisationRate Liberalisation

Albania Bosnia and Herzegovina

Croatia FYR Macedonia

Montenegro Serbia Slovenia

2000 2,33 2,33 3,33 2,67 n.a. 1 3,33

2001 2,33 2,33 3,33 2,67 n.a. 1 3,33

2002 2,33 2,33 3,67 2,67 n.a. 2,33 3,33

2003 2,33 2,33 3,67 2,67 n.a. 2,33 3,33

2004 2,67 2,67 4 2,67 2,3 2,33 3,33

2005 2,67 2,67 4 2,67 2,3 2,67 3,33

2006 2,67 2,67 4 2,67 2,7 2,67 3,33

2007 2,67 2,67 4 2,67 2,7 2,67 3,33

2008 3 3 4 3 3 3 3,33

2009 3 3 4 3 3 3 3,33

2010 3 3 4 3 3 3 3,33

Loans-to-GDP Ratio in % Loans-to-GDP Ratio in % (loans to nonfinancial private sector)(loans to nonfinancial private sector)

Albania Bosnia and Herzegovina

Croatia Greece FYR Macedonia

Montenegro Poland Serbia

2004 9,6 32,3 51,8 n.a. 22,1 16,8 n.a. 24,8

2005 15,3 36,5 56,4 75,6 25,1 20,7 89,6 30,7

2006 22,2 39,5 64,0 79,5 30,2 39,4 93,1 30,8

2007 30,0 44,4 67,1 88,0 36,8 83,0 98,0 35,3

2008 35,2 50,9 68,1 92,2 43,9 90,7 101,8 41,4

2009 37,2 50,2 69,6 90,3 42,9 80,4 107,5 45,0

2010 38,2 51,9 70,2 92,1 44,9 81,4 109,6 47,5

Vulnerability IndicatorsVulnerability Indicators  Banking system Bank

dep.Loans/ dep.

Country risk

Nonperforming loans

  

(end of 2010)/4 latest  

 Total assets as share of

GDPShare in total assets:   12.10.11

State-owned banks

Foreign owned banks

% of GDP Private sector, in %

(CDS spread, bps)

NPL in % Dec

2010

NPL in % latest

Albania 77,0 0,0 92,4 68,3 58,8 … 7,6 8,7

Bosnia and

Herzegovina 86,7 0,8 94,5 34,8 161,8 … ... ...

Croatia 116,8 4,3 90,3 61,8 117,5 492,5 ... ...

FYR

Macedonia 65,4 1,4 93,3 50,2 94,3 … ... ...

Montenegro 97,4 0,0 88,4 51,2 126,5 … 21,0 ...

Poland 76,8 22,9 70,5 45,5 116,3 268,6 8,8 8,4

Serbia 65,3 16,0 75,3 … … … 16,9 17,1

Corporate Income Tax Rates, 2011Corporate Income Tax Rates, 2011

Rates of Value Added Tax, 2011Rates of Value Added Tax, 2011

Fiscal Balance and Public Debt, 2011Fiscal Balance and Public Debt, 2011Country Fiscal balance,

in % of GDPPublic debt, in % of GDP

Albania -3.6% 60.0%

Bosnia and Herzegovina -1.3% 39.0%

Croatia -5.0% 46.0

FYR Macedonia -2.5% 27.7%

Montenegro -4.1% 45.9%

Serbia -5.0% 49.0%

     

Germany -0.8% 80.5%

Greece -9.4% 170.6%

Poland -5.0% 56.4%

EU-27 -4.4% 82.5%

Balance on Current Account, Balance on Current Account, as percentage of GDPas percentage of GDP

Country 2004 2005 2007 2010 2011

Albania -4.0 -6.1 -10.4 -11.4 -12.3

Bosnia and Herzegovina -16.2 -17.1 -10.7 -5.7 -8.8

Croatia -4.1 -5.3 -7.3 -1.1 -1.0

Kosovo -8.4 -7.4 -8.3 -17.4 -20.3

FYR Macedonia -8.1 -2.5 -7.1 -2.1 -2.7

Montenegro -7.2 -16.6 -39.5 -24.6 -19.5

Serbia -12.2 -8.8 -16.1 -7.4 -9.5

           

Germany 4.7 5.1 7.4 6.0 5.7

Greece -5.8 -7.6 -14.6 -10.1 -9.8

Poland -5.2 -2.4 -6.2 -4.7 -4.3

EU-27 0.5 0.1 -0.4 0 0.2

Unemployment Rate, LFS, in percentageUnemployment Rate, LFS, in percentage

Country Unemployment rate,

2008

Unemployment rate,

2010

Unemployment rate,

2011

Albania 13.0 13.7 14.0

Bosnia and Herzegovina 23.4 27.2 27.6

Croatia 8.4 11.8 13.5

Macedonia 33.8 32.0 31.4

Montenegro 17.2 19.6 19.7

Serbia 13.6 19.2 23.0

       

Germany 7.5 7.1 5.9

Greece 7.7 12.6 17.7

Poland 7.1 9.6 9.7

EU-27 7.1 9.7 9.7

Monthly Remuneration per Employee, 2010Country Euros % (EU-27=100) Index of real wages,

2009 (2000=100)

Albania 246 8.9 n.a.

Bosnia and Herzegovina 622 22.4 n.a.

Croatia 1054 38.0 121

FYR Macedonia 491 17.7 159

Montenegro 715 25.8 195

Serbia 461 16.6 245

Poland 883 31.8 125

EU-27 2776 100 134

Gross national savings % of GDPGross national savings % of GDP

Income Inequality, the Gini Index, 2008Income Inequality, the Gini Index, 2008

Poverty Headcount Ratio at National Poverty Line Poverty Headcount Ratio at National Poverty Line (percentage of population)(percentage of population)

Country 2000 2001 2002 2003 2004 2005 2006 2007 2008

Albania 25.4 18.5 12.4

Bosnia and Herzegovina 19.5 17.7 14

Croatia 11.2 11.1

FYR Macedonia 19.1 19.2 18.5 20.4 19

Montenegro 11.2 11.3 8 4.9

Serbia 14 14.6 9 6.6

Poland 14.8 15.6 16.6

IMF Advices “Tailored” to Individual Country CircumstancesIMF Advices “Tailored” to Individual Country Circumstances

  Labour market institutions and policies Broader policies

Country

Minimum

wages

Unemploy

ment

benefits

Labour tax Employme

nt

protection

legislation

Collective

bargaining

Active

labour

market

policies

Public

wage bill

Pensions Growth

reforms

Greece √   √   √   √ √ √

Iceland           √      

Latvia √           √ √  

Portugal √ √ √ √   √      

Romania             √ √  

Serbia             √ √  

Ukraine               √  

CPI (Transparency CPI (Transparency International) – World International) – World

ScoreScore

Rank ScoreAlbania 113 33Bosnia&Herz. 72 42Bulgaria 75 41Croatia 62 46Czech rep. 54 49FYRM 69 43Greece 75 41Hungary 46 55Kosovo 105 34Latvia 54 49Lithuania 48 64Montenegro 75 41Poland 41 58Romania 66 44Serbia 80 39Slovakia 62 46Slovenia 37 61Turkey 54 49

Corruption perception index

Corruption perception index (TI) – Rank by Corruption perception index (TI) – Rank by

countriescountries

Western BalkanWestern Balkanss Corruption CorruptionIndicator Total Urba

nRural Male Fema

le

Percentage of population having contact with public administration

82 83,5 80,3 82,4 81,7

Prevalence of bribery (%) 12,5 12,2 12,9 13,3 11,7

Average number of bribes 5,0 4,9 5,1 4,9 5,1

Average amount paid (EUR) 133 149 116 130 138

Average amount paid (EUR.PPP) 257 294 216 125 255

Average amount of bribes paid in cash as percentage of GDPAverage amount of bribes paid in cash as percentage of GDP perper capita and as capita and as

percentage of average nominal monthly salary, by country/area (2010)percentage of average nominal monthly salary, by country/area (2010)

Countries/AreasIndicators Albania Bosnia&

Herzegovina

Croatia Kosovo Montegegro

Serbia FYRM

Average bribe (EUR.PPP) 103 222 410 174 480 349 1212Average bribe (EUR) 43 112 280 179 233 165 470Average bribe as % of GDP/capita

1,6% 3,5% 2,7% 10,0%

4,9% 4,0%

14,4%

Average bribe as % of average nominal monthly salary

14% 28% 27% n.a. 50% 35% 144%

Percentage disPercentage distribution of bribes paid, by purpose of paymenttribution of bribes paid, by purpose of payment

Percentage distribution of bribes paid by type of Percentage distribution of bribes paid by type of

paymentpayment

The underground/shadow economy affects ........The underground/shadow economy affects ........

Twin peaksBoth unemployment and government debt are high in advancedBoth unemployment and government debt are high in advanced

economies following the Great Recessioneconomies following the Great Recession

Advanced economiesunemployment rate

Advanced economiesgeneral government gross debt

Source: Finance & Development September 2011

Cutbacks hit homeCutbacks hit home Fiscal consolidation reduces incomes and raisesFiscal consolidation reduces incomes and raises unemployment in the short run.unemployment in the short run.

Impact of a 1 percent of GDP fiscal consolidation on GDP and Impact of a 1 percent of GDP fiscal consolidation on GDP and unemploymentunemployment

Note: Chart reports point estimates and one-standard-error bands; income measured by real GDP. See IMF (2010) and Guajardo, Leigh, and Pescatori (2011) for estimation details.

No job soonFiscal contractions raise unemployment, particularlyFiscal contractions raise unemployment, particularly

long-term unemploymentlong-term unemploymentImpact of a 1 percent of GDPfiscal consolidation onshort-term unemployment

Impact of a 1 percent of GDPfiscal consolidation on long-termunemployment

Source: Finance & Development September 2011

Hitting paychecksHitting paychecksSpending cutbacks affect wage earners the most.Spending cutbacks affect wage earners the most.

Impact of a 1 percent fiscalconsolidation on wage income

Impact of a 1 percent fiscalconsolidation on prot and rent income

More austerity?More austerity? No! Jim O’Neill, president of Goldman Sachs asset management and father of the

acronym BRIC:

introducing reforms does not imply austerity!

reducing a government’s deficit without a clear strategy for economic growth is not an

intelligent policy.

No! Deutsche Bank: it is important to let the ECB pump money into the system without having this imply

conditionality. That is, the ECB should use anti-spread shield to cut interest rates on Italian

and Spanish debt without having to ask additional austerity measures to the two countries.

Relevant ChangesRelevant Changes Aligning Western Balkans’ legislation with the EU acquis in the field of labour law

Aligning the anti-discrimination laws with the EU acquis

Implementation of relevant social legislation

More efforts in the area of social dialogue

Cope with unstable and deteriorating labour markets

Free movement of labour with EU markets … (Croatian workers)?

NB: EU new budget (2014-2020) priorities: employment, innovation,

effective management natural resources.

The Internet economy: a big change for the region?The Internet economy: a big change for the region?By 2016, there will be 3 billion Internet users globally, a bit less that half the world’s population. The Internet economy will reach $4.2 trillion in the G-20 economies:- if it were a national economy, the Internet economy would rank in the world’s top five, behind only the U.S., China, Japan, and India, and ahead of Germany. Across the G-20, it already amounted to 4.1% of GDP, or $2.3 trillion, in 2010—surpassing the economies of Italy and Brazil;- the Internet is powering growth and creating jobs.

 In an average country: +10% in the Internet usage increase employment of +0.44% and +1.47% of youth employment.

  The Internet economy in the developed markets of the G-20 is forecast to grow at an annual rate of 8% over the next five years. In developing markets, annual growth is expected to be 18%. These rates far outpace just about every traditional economic sector.

This growth delivers new jobs across the employment spectrum and the jobs this growth creates are more valuable than others. Estimates show that in the United States the multiplier effect for high-tech positions is three times that for jobs in traditional manufacturing.Markets worldwide shows that in the last three years, small and midsize companies that have embraced the Internet in their business operations grew by 10% annually, adding jobs as they did so. Companies that have not grew more slowly or shrank over the same period.

In recent years, multiple Central and Eastern European countries have undertaken efforts to build Internet enablement and engagement. Estonia’s EstWin program aims to provide every household and business with fast fiber-optic network access by 2015. Latvia and Lithuania rank among the top five countries for upload and download speeds

Thank you!Thank you!