But, more importantly, there is a political pressure towards it, driven by populist impatience that would like to have a lot, right away. For a number of years this impatience has been hindering long-term efforts in the form of fiscal consolidation and structural reforms, and these have unfortunately slowed in G20 countries. When we compare the performances of our different European Member States, it is clear that debt and public spending are not the engines of growth. There is a need today for fiscal stimulus in those countries that have surpluses, and for structural reforms across the board: without this there can be no sustainable growth. On this issue, I would just like to say a word on France, which has stood out as a positive exception over the past two years: the gilets jaunes (yellow vest) crisis provided justification for an emergency “package” to bolster purchasing power; but I do not think it should or even could halt the transformation efforts already underway. Lastly, and this is our third challenge, isolationism, characterised by the escalation of trade tensions, constitutes the biggest short-term threat to global growth. Even before the tariff hikes, the uncertainty caused by protectionist stances, essentially on the part of the United States, already appears to be threatening growth via its impact on business investment. More broadly, uncooperative economic strategies – including within Europe – are on the rise.
The increased public investments in the infrastructure, provided by still comfortable fiscal position (the budget deficit was on average 3% of GDP during the crisis and the government debt is at 34% of GDP, the forth lowest in the Europe) are additional factor for growth. However, although the negative spillover effects of the global and Euro zone crisis to the trade, remittances and FDI’s could be diminished as Euro zone recover, still, the financial system of our SEE countries, that is broadly based on banks, is exposed to the risk of disruptive withdrawal of funds by European banks. Thus, when we assess the crisis’s impact on the financial system in our economies, we should distinguish the two phases. In the first phase of the global crisis, the negative spillover effects were pronounced on the local capital markets, with large portfolio withdrawals by institutional investors. On the other side, in that time, the Vienna Initiative has prevented a systemic banking crisis. However, with the new wave of the Eurozone crisis (extended at the end of 2011), there are many new challenges for SEE countries that should be rightly followed by Vienna Initiative 2. Concerns with respect to Euro zone banks’ deleveraging, due to new capital requirements by the EBA are materialized. The deleveraging by the Euro zone parent banks have affected the SEE credits’ developments and now there is new concern regarding to the upcoming asset-quality review and stress test of the Euro zone banks that could lengthen this process even further.