Europe and Central Asia Knowledge Brief

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This is a regular series of notes highlighting recent analyses, good practices, and lessons learned from the development work program of the World Bank’s Europe and Central Asia Region.

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Improving Protection in Financial Services for Russian Consumers

2009-12, Rutledge, Sue

Over the last decade, consumer credit in the Russian Federation has expanded from almost nothing to 9.2 percent of Gross Domestic Product (GDP) in 2008. This is an average increase of 84 percent a year for five years. Recent developments in financial markets have highlighted the need for consumer protection and financial literacy for the long-term health of the financial sector. The rapid growth of household lending has been accompanied by an increase in the number of households that have difficulty in understanding the risks and obligations that they assume, or the full range of choices available. In the United States mortgage markets for instance, complex financial contracts were sold to borrowers, some of whom had weak credit histories. The consequences were disastrous, and highlight the importance of consumer protection and financial education to prevent other similar events.

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Reshaping Economic Geography : Implications for New EU Member States

2009-04, Gill, Indermit, Roberts, Mark

The ongoing crisis should spur deeper European integration, rather than a return to the nationalism of the past. The World Development Report 2009, reshaping economic geography, spotlights several issues for new European Union (EU) member states. From 1950 to 1990, Eastern Europe was impermeable to the flow of goods, services and ideas from the West, and grew slowly. During the same period, gross domestic product (GDP) per capita in fourteen Western European economies grew at three times the pace of Eastern Europe. The drivers of West European growth were market economies, regional cooperation, and global economic integration. The European Economic Community, started by six Western European nations in 1957, continued to increase its membership with the ultimate aim of full economic and monetary integration. After the collapse of the former Soviet Union in 1991, the EU10 countries, along with Malta and Cyprus, joined the expanded European Union, an economic zone based on the principles of democracy, markets and the free mobility of goods, capital and labor. The 27country European Union has a combined population of almost 500 million people and accounts for over 30 percent of the world's GDP. But the legacy of division has meant that the EU10 countries lag considerably behind most of the other member states. While the EU10 have brought 123 million people into the European Union, they have reduced its average level of GDP per capita by an estimated 15.6 percent.

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Competition in Health Insurance

2009-08, Schneider, Pia

This knowledge brief presents the key findings of a recent World Bank report on, 'health insurance and competition'. The report examines whether competition helps multiple insurers better manage health expenditures by, for example, contracting with more efficient providers or directing consumers towards less costly care (i.e. consumers who use generic drugs pay lower premiums or co-payments). The Netherlands, Switzerland, Slovakia, and the Czech Republic are some of the countries that already have multiple and competing insurance systems in place.

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Social Protection Responses to the Global Economic Crisis in ECA

2009-03, Lindert, Kathy, Schwarz, Anita

Besides affecting the private sector, the current global economic downturn will likely have a far-reaching impact on government revenues around the world. As country budgets are squeezed tight, social programs which directly help poor and vulnerable people will become pressure points for reducing government spending. In many countries in Eastern Europe and Central Asia (ECA), two years of rising food prices, high energy costs and the global economic downturn have combined with other shocks like natural disasters and political instability. The impacts of these crises could reduce government revenues and affect social spending and pension systems, even as the need for unemployment and benefits increases. In the short run, ECA countries may call on the World Bank to provide financial or technical support to help with the immediate impacts of the crises. Rapid support could include: (a) helping countries finance temporary scaling-up of well-targeted safety nets, either in beneficiary coverage or with a topping-up of benefits values; and (b) supporting actions to protect the budgets of well-targeted programs and other crucial spending on education and health. Governments and the Bank need to be prepared to respond more adeptly in the future; safety nets are important not only in times of crises but, in the long-run, they help to protect the poor and allow governments to avoid other, more costly or inefficient policies.

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Per Student Financing in ECA School Systems

2009-06, Forgy, Larry

By the turn of the century, the decreasing efficiency and deteriorating quality of education systems in Eastern Europe and Central Asia (ECA) had reached a critical point. Many countries were facing serious resource allocation problems in general education. While the region had seen sweeping political, economic and population changes, countries continued to manage schools with traditional and centralized institutions. Budgets were allocated on the basis of past history, even as school age populations declined and moved. Consequently, the region had an excessive number of schools, with very low student and teacher ratios. For example, 47 percent of all schools in Armenia had less than 300 students by 2003, and Lithuania averaged only 12 students per teacher from 2000-2005.