Development and Finance from issue 2009/2

Margit Rácz

Reflections on the Crisis as an Acid-Test of the Integration Framework

- Abstract -

JEL F-15, G-01

We cannot yet say when the crisis will bottom out. If this takes a lengthy period of time then it is highly likely that a non-economic problem will gain in significance, namely, that the marked income differences created by capitalism will become increasingly difficult to tolerate. This is because it is financial managers on Wall Street that are responsible for the crisis, so we can quite easily identify who is behind the economic recession. If lasting and sensitive adjustments are required to prevent the budget deficit from growing, this puts pressure on the need for the payment of taxes and contributions. The real economic crisis that evolved from the financial crisis could become a social crisis, which may imply significant social unrest and increased political extremism. The unfolding of such a situation could be particularly problematic in emerging EU economies. It is worthwhile emphasising this because it seems that above-average economic losses have emerged in some emerging countries, while other emerging Member States have to implement structural reforms in budgetary spending earlier than planned. An example of the former is the Spanish rate of unemployment that is creeping up towards twenty percent, while the measures to be taken in Hungary to pull the reins on the budget deficit illustrate the latter.

Margit Rácz, CSc, research director (Institute for World Economics of the Hungarian Academy of Sciences)

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