Nowotny: „CESEE Needs New Growth Model“
Ewald Nowotny, governor of Austria´s National Bank (OeNB), thinks that the current growth model for the region is outdated.
According to Nowotny, the business model of Central, Eastern and Southeastern Europe is mainly based on foreign direct investments and export growth. The governor of OeNB explains that this model is “worn out”. This model is not able anymore to support the convergence process, Nowotny said at the Conference on European Economic Integration in Helsinki.
The current model, which is based on exports and capital inflows is not sustainable, Nowotny says. In the last five years, many structural and institutional weaknesses in CESEE countries became visible. These weaknesses will lower the long-term growth rates, Nowotny points out.
Nowotny argues that the economic growth rates in the CESEE region have flattened steadily. The growth difference between the Eurozone and the CESEE region went down from four percentage points to two percentage points, he says. “If this difference would persist, the convergence process would take more than fifty years.” Nowotny notes. Then, there would be no difference in GDP between Western and Eastern Europe anymore.
For Nowotny, this period is too long. Nowotny argues that the reform process in the CESEE countries require higher growth rates. Otherwise the economic integration could be endangered, he says. Also Western Europe must be interested in a reduction of the economic gap.