As a result, banks in some jurisdictions quickly accumulated significant exposures to local assets (such as real estate), and when the crisis hit, cross-border funding was quickly withdrawn and sizeable losses had to be absorbed within national borders. Looking ahead, lack of genuine financial integration and low resilience will always expose us to systemic risks. The crisis has also exposed our lack of some fundamental analytical tools and policy instruments The complexity and sequencing of the crisis, as well as its morphing over time, have also exposed our weak understanding of micro- and macro-fundamentals. Here, I am talking about basic notions, not only more advanced concepts and elements. Few economists saw the financial crisis coming, understood the serious risks generated by persistent imbalances and recognised the deep changes in economic structures and financial markets that were under way during the build-up to the global financial crisis and the sovereign debt crisis in the euro area. With EMU, the nature of prevalent shocks has changed to slow moving processes that are more difficult to tackle with the few adjustment mechanisms at the disposal of stressed countries. Facing this crisis, we were armed with a toolkit that was suited to a previous era: i.e., inadequate models and limited monitoring tools to support EMU. It is thus understandable that the crisis has also heralded a “renaissance of research”, with both positive and normative implications. One of the least acknowledged outcomes of the crisis is the enrichment of our professional toolkit to conduct economic, monetary and financial analyses.
One area that would definitely benefit from the implementation of such reforms is the labour market, at a time when the Romanian one faces challenges that are certainly not new or uncommon. Given our status of an open catching-up economy, within a European Union which has at its core the free movement of capital and labour, we were bound to end up sooner or later in somewhat of a dilemma. To be more specific, there are various opinions in our economy about where wages should be: on the one hand, they should be governed by productivity dynamics, so as not to lead to an erosion of the competitive position, yet on the other hand, they cannot be significantly below what is available in other economies, as it would simply lead to a labour force drain, with dramatic consequences if not addressed quickly. We are actually dealing with an emigration problem today, as more than three million Romanians (a significant percentage of the population) have left their homeland for other EU Member States. In order to mitigate this, wages should go up. As noted above, the only way to do that without upsetting competitiveness is to boost productivity. This can be done along a number of avenues, many of them involving, however, a significant amount of time (for example, one cannot solve the population-aging problem overnight). Foreign direct investment in recent years helped total factor productivity, but employers are currently being challenged by the shortage of labour force, in part determined precisely by the significant emigration.