CHALLENGES AND PRIORITIES FOR THE NEXT DECADE

transcript

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

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

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

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

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

GDP Growth

India China United States EU27

Exchange Rates: $/ €

0,60,70,80,91,01,11,21,31,41,51,6

Exchange Rates: $/ yuan (CNY)

$/yuan (CNY)

Exchange Rates: yuan (CNY)/ €

yuan (CNY)/€

Exchange Rates: $/ ¥

0,0060

0,0065

0,0070

0,0075

0,0080

0,0085

0,0090

0,0095

0,0100

Europe Brent Spot Price FOB (Dollars per Barrel)

0,010,020,030,040,050,060,070,080,090,0

Oil price

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)

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

CHALLENGES AND PRIORITIES FOR THE NEXT DECADE

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

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

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

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

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

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

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

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

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

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

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

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

CHALLENGES AND PRIORITIES FOR THE NEXT DECADE

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