«Russia and the World Community’s Respond to a Challenge of Instability of Economic and Legal Systems Materials of the International Scientific-practical Conference ...»
EKONOM: n.20, 15.-21.5.2003 - False promise of stability: Joseph Stiglitz about negative impact of inflexible fiscal policy According to document “statistical Annex of European Economy 2007” achieved mentioned countries in 2005 followed real growth of GDP: Germany: 0,9%, France: 1,2% and Italy: 0,1% Decision of General Council of ECB of 9.august 2006 upon which was rate for standard REPO tender increased from 2,75% to 3% esses in EU and threat of negative asymmetric shocks. 173 Another negative aspect which deteriorate situation in these countries are insufficient reforms of social system in form of too generous system of health care and health insurance as well as pension reforms. Already decade ministers of these government promise initiation of structural reforms what would certainly cause an increase of deficit, though with perspective of its reduction in future. Increase of rate in a certain measure reduce inflation pressure in eurozone, thought it doesn’t solve real problems of these economies – absence of investments and in that time insufficient growth.
Stability and growth pact vs. new member states Stability and growth pact has clearly completely other dimension and role in new member states of European Union such as Slovakia. These countries are in the middle or in the second part of transformation process of national economy. Research of economic cycles does not have long tradition in transitive economies, what partially explain, why conclusions of different analyses aren’t enough convincing until now. However, it is not only about shortness of surveyed period. Very serious fact is that economic cycle in new member states is still affected by some specific factors related to unfinished transformation. These countries went through fundamental changes of all-society, economic and political environment during last fifteen years. Countries as Slovenia, Lithuania, Latvia, Estonia, or Slovakia are very small though very open economies. Together they are joined by same latter fate of formation of independent state. It’s definitely one of the reasons why these countries have relatively good indicators of net foreign debt. Even though no government is awareness enough, when we check the result of Baltic countries or for example Slovenia 175 – results are fair surprising. Low budget deficit, stable monetary environment, low interest rates, acceptable unemployment rate, and rising growth performance. The most interesting are not mentioned positive indicators but something else. In our opinion these countries are the most interesting not for achieved results but permanent dissatisfaction with present state – even though with good development in compare with old member state of EU – and at the same time their stubborn ambitions. It is shown in the first place in objectives to reduce government expenditure and restrain public consumption and reduce government deficit. Especially in Baltic countries and in Slovenia sounds opinion about toughening and decreasing of three percent limit on lower level more often.
Already mentioned insufficient new investments in old member countries of European Union introduce problem of insufficient tax income in state budget but at the same time they have or set new considerably more important requirements as social expenditure. In first decade after velvet revolution had firms from Western Europe tendency to expand to countries of middle and Eastern Europe. It was mostly new expansion, which resulted from growth of successful IA,J.: European monetary union after five years, Ekonomick asopis, vol.53, 2005, n.5, p.499- IA,J.: Risks of European monetary union, Ekonomick asopis, vol.53, 2005, n.6, p.559- According to Eurostat from 24.april 2006 Slovenia achieved decreasing of deficit in 2005 to level of 1,8%.
Gross debt to GDP ratio was 29,1% in the same year.
firms and expansion of production, eventually offer of services in the territory on new markets. After some time arrived privatization wave, which partially last till now and foreign firms actively joined and join the existed firms. It was source of foreign capital for mostly successful firms, eventually restructured firms with considerably probability to make gains (e.g. banking house). Both waves of capital investment expansion had positive impact on all of participated sides. Firms expanded, profits grew in mother country, expanded their customer background to east, employment increased, tax revenue raised. Country of recipient profited from imported capital, new investment goods, technologies, know-how, imported products, increased employment in prospering segment, increasing productivity of labor and above all implementation of health transparent competitive market environment.
Between while achieved these countries important step forward in transformation of their economies. Nobody doubts following of Copenhagen criteria and these countries are part of NATO and EU. Currently new member states of EU started to implement drastic structural reforms. To follow terms of Stability and growth pact are structural reforms essential assumption to stabilize public finance. In new member states – first of all in small open fast growing economies (Slovakia, Slovenia, Baltic countries) implement essential reform of public finance, from which the most attractive for investors is tax reform. Reducing the tax burden and its clarifying for corporate entity has very positive impact on firms, reinvestments, employment, increasing of labor productivity. It is shown also in revenues and expenditures of state budget. 176 After accession of Slovakia to EU, we register an increase 177 of foreign direct investments in Slovakia, which are not privatization or speculation but green-field investments in their pure form and in many cases, firms from Western Europe move to new member states. Definite reason is lower tax burden in combination with low costs (first in form of cheap and qualified labor force). Germany and Belgium – countries with the highest tax burden – say by the highest leaders defend against tax competition and indicate that fail of tax revenue in national budgets can reflect in amount of future regional help for new member states. Even suggestions were heard about specifying the top and the bottom limits for legal entity income tax in order to prevent of moving investments to states of eastern part of extended union. German government in 2004 even appealed to employers to act more responsible and restrain investments to new member states. It is obvious example of effort to eliminate competitors fight. If new member countries of EU offer quantitative conditions similar to old member countries of union for foreign investors, they will be barely successful. On the present and coming period can’t new members offer investors so qualitatively background in form of developed infrastructure, law enforcement or already mentioned quality business environment to compete Germany or Belgium. And it is the main reason why it is necDetails of budget expenditure planned for 2007 – see chapter 4 of this paper Situation of foreign direct investments was on 31.12.2005 in the amount of 417mld SKK, whereby inflow of FDI was in 2005 in amount of 20mld SKK. Resource: www.nbs.sk essary to create conditions and space for equality of chances for all countries of union, compete for new investments and let them use all available tools to invite new investments – including lower taxes. Only by creating of attractive investment environment, the new working places are created and escalate the pressure on increase of labor productivity in old continent. Maybe the new member countries of EU will be the driving engine in indisputable initiation of necessary reforms in “old” member states of EU. Because reforms are key to follow Stability and growth pact and because of that it is necessary to find courage and political will to implement them into practice.
Fiscal Treaty – New rules for fiscal policy in EU According to Deputy Managing Director of the International Monetary Fund Min Zhu deeper fiscal integration as well as single budget surveillance of the EU Member States is inevitable.Current fiscal Treaty signed in January by 25 EU Member States has several rules they are obliged to follow. First of all it enforces a budget discipline by adopting a national legislature concerning balanced or surplus of structural budget. It allows Member State to record a deficit not exceeded more than 0,5 per cent of GDP, if government debt ratio is much less than 60 per cent the deficit can rise up to 1 per cent of GDP. Violating fiscal pact and exceeding budget limits is under automatic sanctions up to 0,1 per cent of GDP. Moreover Court of Justice of the European Union is coming to be responsible for monitoring these rules where all Member States can call for justice instead of the European Commission. One of the new adopting rules regards also financial bailout from the ESM and it allows countries to apply for stimulus only if they have ratified the pact. European summits should be held at least twice a year with at least once participation of countries which ratified the pact but do not use euro as a legal tender. If 12 of 17 countries will ratify the fiscal pact it comes into force on 1 January 2013.
Bibliografia 1. Baldwin, R. – Wyplosz, Ch.: The Economics of European Integration.
The Mc Graw Hill Companies, 2006.
2. Gonda, V.: Mechanizmus menovch kurzov ERMII. In: Ekonomick asopis, 4. Grauwe, P.: Economics of Monetary Union. 7 th ed. Oxford University Press, 2007.
5. Helsek, M.: Mnov krize (emprie a Teorie), Praha 2004.
6. Ia, J.: Rizik Eurpskej menovej nie. In: Ekonomick asopis, 2005, ro. 53. 7. Muchov, E. – Lis, P.: Fiklna politika v hospodrskej a menovej nii. IURA Edition, Bratislava 2009.
8. www.euroinfo.gov.sk 9. www.oecd.org 10. www.nbs.sk International Oil and Gas Transfer of Technology and the Challenge Introduction:
The rate of technological development is not only determined by domestic innovations, but it also is affected by international distribution of technology. In developing countries where domestic innovation is low the international distribution of technology is of high importance. This is indeed the reason why the majority of Research and Development in global economy is concentrated in industrial countries. The reason is the high costs of Research and Development, and creation of a national innovation system. Since they have realized that the main source of new technology is the domestic innovation. But scientific research can improve the technological development of the country only to a certain extent. Because most of countries cannot afford the high costs of Research and Development. As a result, transfer and distribution of technology is suggested as the second alternative. The technology licensing among different countries is mainly done in four ways. First, through trading commodities and services, and particularly technologically advanced intermediate products which are invented overseas. In one way, by use of reverse engineering, we find out about the design through close study of the product; however, it should be noted that reverse engineering is not often followed by any agreement with the owner of the patented technology (or patented technology) hence, this initiative is considered illegal. 178 Second, it is done through learning about foreign technology by acquiring the knowledge about a design or professional contact and cooperation with foreign experts which results in transfer of non-codified knowledge.