October 19th 2015

European debt crisis: causes and solution approaches.

Dr. Konrad Pesendorfer, Director General of Statistics Austria

The Entrepreneurial School® was honored to welcome Konrad Pesendorfer, Director General of Statistics Austria, as guest lecturer in this year’s MCI Alumni & Friends series. Within the scope of his inspiring talk, Pesendorfer illustrated the consequences of the Eurozone crisis and possible lessons the EU has drawn from it.

According to the economist and statistics expert Pesendorfer, the consequences of the European debt crisis, which has already persisted since 2009, are particularly visible in the development of the gross domestic product and rates of unemployment. During the years of the debt crisis, the GDP has considerably decreased. Austria’s deficit, however, has generally remained below EU average. While Austria has meanwhile also been able to regain the level of before the crisis, the economic growth of the European Union has generally been comparatively slow. The crisis has additionally caused an increase in unemployment rates. Attempts to counteract the development have not yet been fruitful. Despite the fact that Austria’s unemployment rate was at a minimum before the crisis and remained rather low throughout the crisis, the rising number of unemployed persons will become an issue in near future.

As a reaction to the decreased gross domestic product and increased rate of unemployment, EU states took measures which in turn induced a rise in government expenses. In order to be able to reduce their levels of debt, EU members are now forced to adopt measures which may also be considered controversial.

Drawing on public means during the economic crisis, the EU has for the most part been able to avert further regression. Still individual member states are now faced with the enforcement of stricter EU regulations, as the Director General of Statistics Austria criticizes. From Pesendorfer’s point of view, only a relaxed system of rules along with more room for flexibility could increase EU’s capacity to act and prevent future crisis. This would require a new distribution of competences with a shift from individual countries towards the European Union as a whole.

Already during the crisis, measures were taken for the correction of deficits in various domains. The installment of supervision of cross-border banking and the prescription of minimum capital requirements, for instance, have affected financial markets. Also with respect to fiscal policy several rules and regulations have been passed at EU level with the aim to facilitate the identification of early indicators of economic decline. But Pesendorfer finds fault with such measures, for their success particularly depends on qualitative data. The focus, however, should be on the quality of public resources. More attention also needs to be given to the improvement of the data base and the establishment of consistent criteria for data analysis.

Pesendorfer’s successful lecture was concluded with an animated discussion moderated by MCI Rector Andreas Altmann.