OeNB Governor Nowotny "During the Crisis, the Euro Acted as a Protection Shield Beyond the Euro Area"

OeNB Governor Nowotny "During the Crisis, the Euro Acted as a Protection Shield Beyond the Euro Area" / Picture: © Wikipedia / Christian Wirth (Wirthi)

Not only the euro area benefits from the Economic and Monetary Union, but the whole of Europe. The euro area and the countries of Central, Eastern and Southeastern Europe (CESEE) must now, however, reduce their vulnerability and retake their previous course of growth in the medium term, according to Ewald Nowotny.

Given the increased risk aversion of traditional investors, alternative sources of growth will have to be developed. Growth and competitiveness of the countries must be backed by structural reforms and investment in infrastructure. "This includes a well conceived regulation of the financial markets. In case of a crisis, a strong financial market integration can lead to a rapid transfer of loss of confidence", said Nowotny.

Mantaining fiscal headroom is equally important. Although the Eastern European countries continue to have significantly lower debt levels than the euro area, every opportunity should be availed to bring public finances back to a sustainable course without jeopardizing growth. This is the only way to prevent that the largely dominated financial crisis merges seamlessly into a debt crisis, as has happened in some Western European countries.

The development of Eastern Europe is important for Austria's growth prospects because of the closely-knit trade and investment relationships. Even despite the financial crisis, Austria's economy was able to expand its market share further there. Nowotny: "Even the strong commitment of the Austrian banking sector in the region has not been affected strongly by the crisis."