European Investment to Support CESEE and Euro Area Countries

How to maintain momentum in the EU convergence process, Ewald Nowotny, Governor of the Oesterreichische Nationalbank (OeNB), asked when opening this year’s Conference on European Economic Integration (CEEI) in Vienna. The CEEI 2014 coincides with three anniversaries: 25 years since the fall of the Berlin Wall, 15 years since the introduction of the euro and 10 years since the biggest round of EU enlargement. Nowotny affirmed that these watershed events markedly raised the living standards and the level of freedom for an overwhelming majority of Europeans.

Enlargement was a “win-win situation” for the acceding countries, the EU as a whole and Austria with its strong links to the CESEE region. CESEE accounts for a 22% share (2013) in Austria’s total goods exports, and Austrian banks’ high international exposure is concentrated with their CESEE subsidiaries – albeit diversified across countries. “Banks ought to promote a sustainable growth model in countries with adequate economic and legal conditions – in the spirit of the Vienna Initiative,” Nowotny confirmed.

“The crisis has revealed that the previously remarkable catching-up process is neither automatic nor irreversible,” Nowotny continued. In some cases, a solid industrial base helped economies to escape the dilemma of either chronic disequilibria or contractive deleveraging. The 18% decline in investment levels across the EU-28, however, has negative consequences for present and future growth.

Nowotny commended the countries at the Southern and Eastern European periphery for improving their external competitiveness but regretted that the price for this progress was high unemployment, stating that the macroeconomic environment will have to improve all over Europe to make rebalancing successful. Nowotny dismissed the popular presumption that “There is no alternative,” supporting the investment package proposed by the new European Commission. He also underlined the successful creation of the banking union as a major step toward completing the architecture of Economic and Monetary Union.

These and other issues are being discussed at the CEEI 2014 on Monday, November 24, and Tuesday, November 25, 2014, by high-ranking representatives of other European central banks, commercial banks as well as speakers from international organizations, financial institutions, corporates and academia.