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CHALLENGES AND PRIORITIES FOR THE NEXT DECADE. Speech of the Minister of Finance Mr. Charilaos Stavrakis - Annual Conference of ECONOMIST - - 8 April 2008 -. Introduction. Economist’s conferences have been established as events of high quality discussions on politics and economics - PowerPoint PPT Presentation
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CHALLENGES AND PRIORITIES FOR THE
NEXT DECADE
Speech of the Minister of Finance Mr. Charilaos Stavrakis
- Annual Conference of ECONOMIST -- 8 April 2008 -
2
Introduction
Economist’s conferences have been established as events of high quality discussions on politics and economics
Opportunity for an open and frank exchange of views with distinguished personalities, regarding the challenges and priorities of the next decade
The objective is the creation of a common vision that would reinforce social and economic prosperity, peace and political cooperation
The well being of citizens should be at the centre of our efforts
3
Contents of my Speech
Focus on economic and social challenges
Outline of the current situation of the world economy
Presentation of main challenges and policy priorities
Brief reference to the political dimensions
4
Main Messages
Radical changes in the world call for new approaches and reforms
Cooperation of social partners is essential for a successful confrontation of challenges
5
World Scene
Re-rankings - rapid growth in China, India, emerging economies
Challenges in the USA – short term = confrontation of the financial crisis – medium term = reinforcement of savings, effective address of the imbalances in the Balance of Payments
Challenges in the EU – reinforcing the remarkable achievements in public finances & adapting the supervisory system of the financial sector to the current situation & promoting structural reforms in the labour market & maintaining and enhancing the social character of the society
6
GDP Growth
-4,0
1,0
6,0
11,0
16,0
198
0
198
2
198
4
198
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198
8
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0
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2
199
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199
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200
2
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200
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India China United States EU27
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Exchange Rates: $/ €
0,60,70,80,91,01,11,21,31,41,51,6
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
$/€
Exchange Rates: $/ yuan (CNY)
0,110
0,115
0,120
0,125
0,130
0,135
0,140
0,145
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
$/yuan (CNY)
Exchange Rates: yuan (CNY)/ €
6,0
7,0
8,0
9,0
10,0
11,0
12,0
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
yuan (CNY)/€
Exchange Rates: $/ ¥
0,0060
0,0065
0,0070
0,0075
0,0080
0,0085
0,0090
0,0095
0,0100
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
$/¥
8
Europe Brent Spot Price FOB (Dollars per Barrel)
0,010,020,030,040,050,060,070,080,090,0
100,0
1988
1989
1990
1991
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1999
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Oil price
9
World Scene (2)
Developments in the world exchange markets reflect re-rankings in the world economy – gradually new balance between Euro & dollar & yen & yuan
Changes in oil markets - maintenance of oil price at high levels
Changes in the commodity markets - maintenance of high commodity prices (cereals)
10
World Scene - (inflation) (3)
Oil prices and commodity prices will probably remain at high levels
... they lead to important changes in the world market
Maintenance of low inflation and low interest rates challenge for CB – potential trade off between growth and macroeconomic stability
11
CHALLENGES AND PRIORITIES FOR THE NEXT DECADE
12
Economic Growth Model
Adaptation of the economic model to the new situation Cooperation of public sector, business sector, trade-union
and social partners remains essential Public sector - strategic & regulatory & social role Business sector – dominant role in the production sphere
within a framework of a flexible and regulated economic system
Trade-union and social partners - active participation, aiming at safeguarding social cohesion
Modern, flexible and socially balanced economic model creates a framework for effective reforms and social justice = adaptation to the current situation
13
Safeguarding of Economic Viability
Healthy public finances - precondition for further economic and social progress
Reforms to confront the effects of the ageing population
Objectives - satisfactory level of pensions and health care also for the next generations
14
Adaptation of Financial Sector
Development of new products/ services enhance international liquidity and facilitates the channeling of capital resources to profitable activities - however, at the same time, it increases risks
Improvement of the financial stability framework is a necessity
Necessity for closer cooperation of supervisory bodies on international level and modernisation and adaptation of supervisory systems to the new situation
Objectives - increased transparency and adaptation of risk management systems and liquidity management
15
Modernisation of the State
New management systems and new systems of evaluation of civil servants
New structures that would reflect the strategic – regulatory - social role of the State
Better communication with social partners and the citizen
Simplification of procedures and fighting bureaucracy – better regulation for businesses
16
Growth Framework
Safeguarding economic viability
Effective financial sector
Modern and socially oriented state
...constitute the necessary framework for addressing the challenges of the next decade
17
Development of the growth framework
Low tax burden on production factors (capital and labour)
Reduction of administrative burden on businesses for compliance with legislation and regulations - (better regulation agenda)
Adjusting educational systems and training to the new situation - need for development of multiple skills & skills in the information technology & communication skills
Utilization of new technology
Enhancement of cooperation and networking between the research community and businesses
18
Energy
Saving of energy – of strategic importance
Differentiation of energy sources (renewable energy sources)
Necessary political dialogue of oil producing countries and oil consuming countries for achievement of mutually acceptable agreement regarding pricing policy and production levels etc
19
Water Problem
Expected to become a binding restrictive factor
for economic growth
Saving is key for the next decade
Further development of systems for desalination and recycling
Transport of water from surplus countries - political collaboration
20
Sustainable Development – Environment
Growth and environmental sustainability tend to reinforce each other
Studies confirm – deterioration of environment threatens economic growth
Enhancement of environmental dimension opens up new entrepreneurial opportunities
21
Social Justice
Studies confirm - technological progress tends to aggravate social problems
Creation of new posts in the labour market in jobs of high specialisation and reduction of posts in professions of low specialisation tends to strengthen social inequalities
Tax competition and globalisation tend to limit state resources for the effective exercise of social policy
Challenge of the next decade = new balance between growth and social justice
Safeguarding an adequate standard of living for all citizens & equal opportunities for education & training & general access in high quality health care
22
Political Dimension
Peace and political cooperation necessary conditions for successfully addressing of challenges
Resolving of political problems in our region
The Government of the Republic of Cyprus is ready for a constructive dialogue for a fair and viable solution of the Cyprus problem
Solution will benefit Greek Cypriots and Turkish Cypriots
Economic dimensions of solution should be taken seriously into consideration
Economic viability = political viability
23
Conclusions
Safeguarding economic viability & effective supervision of financial sector & modernisation of public sector constitute the basis for economic and social progress
Utilization of modern technology & development of new sectors are important elements
Energy, water and environment are the biggest challenges
Social role of State - equal access to education and training are extremely important
Peace and political cooperation are necessary