Dubrovnik sets up the path for further liberal reforms in CSE

(IMF, Public domain)

IMF and the governor of the Croatian National Bank organized a conference that encourages further liberal reforms in Central and southeast Europe.

Almost thirty governors of central banks and ministers of finance from Central and Southeast Europe, representatives of the European Commission, European Bank for Reconstruction and Development (EBRD), and European Investment Bank EBI) attended the conference “Accelerating Real Convergence in Central, Eastern and South-Eastern Europe – the Role of Governance and Institutions”, organized in Dubrovnik jointly by the Croatian National Bank and the IMF. The title of the event left no doubt about intentions of the organizers.

The conference was expected to address the issue of permanent gap in development between CSE and the Western Europe. The question to be answered was: when the East of Europe will meet the West? How to make it happen? And what would be the role of the state in this operation? Subsequently, special attention was given to the convergence countries’ experiences as well as to current growth challenges, and the importance and examples of institution building and their role in promoting and realizing fair and sustainable growth.

During the opening of the conference the Governor of the Croatian National Bank, Boris Vujčić stressed that convergence processes has slowed down in the CSE countries after the opportunities offered by the transition were exhausted. If this process is to accelerate again, the agenda must include complex structural reforms.

The unpopularity of the reforms Vujčić attributes, on the one hand, to a lack of public awareness about the importance of structural reforms. And on the other hand, to a certain group of influence that interest is seriously threatened by the proposed changes.

“We can assume that the opposition to the proposed structural reforms is composed of ignorant, who do not understand economics and finances, and on the other hand by privateers who prefer their own profit over the public development and wealth. To put it shortly, if one is against the reforms, must be either foolish or civically dubious,” said Vujčić.

“That, in combination with social norms and culture, makes reforms very difficult. Therefore, not only we must understand the things that need to be done to make our economies and societies more effective and productive. We must also further explain it to the public in order to raise the interest of the undisputed majority and try to explain that encouraging institutional reforms, that would made our societies more effective, lays in the best interests of all or at least of the majority,” he added.

He also noted that the venue of the conference was not chosen to enjoy Dubrovnik in July, but because of the symbolic link between the content of the conference, in particular its part concerning the role of management and institutions, and the city of Dubrovnik.

“The history of Dubrovnik also contains important lessons for European countries seeking to achieve sustainable convergence. First, a prudent monetary and fiscal policy is needed to increase the country’s resistance to external shocks, ensuring a steady growth in revenue without frequent disruption due to the economic crisis (…) Secondly, adequate social care, such as education and health care, is necessary to create professional and motivated human capital. Finally, it is necessary to have a favorable business environment, with the rule of law and efficient allocation of capital to strengthen the development of the most productive sectors, making use of comparative advantage,” forwarded the words of the governor a Croatian weekly Lider.

The IMF Director-General Christine Lagarde participated in a panel that addressed the features of successful and ongoing reforms, with an emphasis on the importance of such institutions-building that are strong enough to lead a new phase of sustainable growth and convergence, and the role of the external environment, such as the European Union, in this process.

Day before the conference, the Prime Minister of the Republic of Croatia Andrej Plenković met Christine Lagarde, and discussed the macroeconomic situation in Croatia and the measures taken to preserve financial stability and the sustainability of public finances. Plenković confirmed liberal course of reforms in Croatia and willingness to join Eurozone. He also presented the National Reform Program 2017 as a fundamental document in the implementation of structural reforms and stressed that Croatia’s exit from the excessive budget deficit procedure is a confirmation of the government’s fiscal policy.

The interlocutors agreed that it is important to continue with the implementation of rational policy on public finance management, which is one of the prerequisites for joining the Eurozone and the introduction of the euro, according to the government.

Jan Muś is a lecturer at the Vistula University.

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