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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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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Enhancing the Employment Chances of Roma

2009-03, Bodewig, Christian

Roma communities in central and southeastern Europe have a history of being excluded from the labor market and still face severe barriers to employment. Besides being marginalized socially, Roma were typically the first to lose their jobs at the outset of the post-communist transition. Many in their next generation grew up in unemployed households, with low educational attainments and limited job skills. The labor market exclusion of Roma persisted even through the years of buoyant economic growth and increasing employment levels prior to the economic slowdown triggered by the global financial crisis in 2008. Many governments in central and southeastern Europe are trying to address the unemployment problem of Roma and other disadvantaged groups by introducing measures to restrict or cut welfare benefit entitlements, so as to strengthen incentives to work. However, research by the World Bank and others shows that simply cutting benefits is unlikely to result in higher employment the labor market exclusion and social marginalization of Roma is a multifaceted issue, and their communities face multidimensional barriers to employment. A more effective way to promote employment among Roma (and other disadvantaged groups) is the employment activation approach increasingly being introduced across many countries in the European Union and the Organization for Economic Co-operation and Development (OECD). This approach balances the mutual obligations of jobseekers and state employment offices in order to secure the successful integration of the most disadvantaged workers.

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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.