Книжка 1, 2009

In Hungary the eighteen years period passed since the change of political regime has seen the formation of a socio-economic pattern in which there are practically no middle class in that sense of Western European society. People are better off than in the past across a range of measures but the benefits are not spread equally: there are winners or losers of the transition but nobody between. Strong and increasing polarization of the society has now become an obstacle to economic and social progress.
The paper analyses the possibility to increase the efficacy of the national economy in a totally new way as it admits the very important - even if indirect - role of the social cohesion and solidarity. If one cannot require effective work, responsible and rational decisions from tired, frustrated and more and more indifferent people all those factors which are capable to stop and reverse this process have a strong indirect effect on the economic performance of the country. The reorganisation of the taxation system towards wealth tax and the decentralisation of decision making on public spending could boost Hungary's integration into Europe and its social and economic development.
JEL: H24, H26, E24, E26

Regional clusters evolved spontaneously at various places in the world following different development patterns. Their success in enhancing competitiveness moved governments and entrepreneurs to copy the patterns. Later on cluster development became part of the European Union's long-term Lisbon competitiveness program in the form of innovative clusters. This article introduces the basic characteristics and features of regional clusters. Then, it argues that without paying due attention to the proper establishment of the basic features fulfillment of other policy goals, like curbing innovation process, cannot be expected.
JEL: F23, L52, O32

This paper analyses the labour intensive industries relocation in EU-27 by exploring the industry concentration, specialization and countries competitiveness. The analysis is based on NACE classification data, Division from 15-37 for EU countries. It has been studied the structural adjustment of the industrial composition and the spatial distribution of the labour intensive industries over time by using various economic indicators and cluster analysis.
It has been found that the relocation process leads to specific spatial location of Labour intensive sector in the EU framework. It is argued that the formed countries clusters concerning employment and trade composition of the manufacture industries is not expected to undergo significant changes in the near future as the observed one in the last decades. The potential benefits for the different participants in the delocalisation process are discussed. Possible future scenarios and prospects are foreseen.
JEL: F14, P52, R12

The aim of this paper is to examine the link between the industrial delocalisation and the changes of the competitive advantages based on results obtained from a Survey of 756 enterprises in five EU countries. The study is enriched by providing cross-country analysis based on some secondary data indicators. An attempt is made by comparing the results from the Enterprise survey and the secondary data analysis to summarize the findings and to outline the specific features and effects of the delocalisation processes on the competitiveness of the EU countries and their firms. Patterns of development of labour intensive industries, their trade performance and countries competitiveness are related to the delocalisation processes.
The study revealed that both sides participating in delocalisation processes, gain in terms of increasing their competitive advantages and profits. However, for countries like Romania and Bulgaria the delocalisation process can bring to problems in their future development due to their low profitability of working under subcontracting.
JEL: D21, F21, O52

The paper critices two hipothetical trajectories for development of the Bulgarian corporate governance model (BCGM) as not feasible, and offers a different solution. The first opposed variant assertsthat BCGM would imitate a converging model, which follows the convergence of the two global CG systems. Its alternative strategy is formulated as adapting the corporate governance system to our national specific with its inherent cultural and political norms. The paper insist that both of the above models are discarding important national features of the BCGM; when taken into account they will reveal a quite different picture for that model, one of lagged model, with charackteristics already overcame in the present day developed countries. Respectively the trajectory it has to follow is quite different from those of the two critisesed hypothesses.
JEL: G30, G38

The paper aims at revealing the corporate governance tendencies in Bulgaria as of 2007 and its findings are based on a country survey on Reporting on Corporate Social Responsibility (CSR) by the Forty Largest Listed Companies in Bulgaria, conducted by the Economic Policy Institute (Sofia) during the same year.
The research steps on internationally applied methodology by focusing on the annual reports and websites of the forty largest companies by market capitalization listed on the Bulgarian Stock Exchange (BSE) - Sofia. It sought to document the existing disclosure practices in the following specific areas - Corporate Governance, Environmental and Social Policy and last but not least to identify best practices in reporting by Bulgarian listed companies.
JEL: M14

The financial crisis started in the United States spread over to Europe and, for the first time after 1945, it developed to an overall macroeconomic crisis in the entire developed world. Social and ideological consequences of the deep recession are expected to follow. The article focuses on the impacts of the crisis on the European Union, with special regard to the economic policy answers on nation-state and community levels. It is stressed that the unprecedented challenges represent both a high risk of stopping or fragmenting the integration process and, at the same time, a unique chance to deepen and upgrade the European integration, as a key player of the changing global economic (as well as political and institutional) system. The answers to be given in 2009 will fundamentally shape the future of Europe in general, and that of the European Union, in particular.
JEL: E60, F02, F15

The condition of the Bulgarian economy by 2008 is analysed in terms of some evolving inner tensions and disbalances. The fastest growth in the sector of industry is due to construction whereas in the services sector - to financial mediation. Such a discordance could not continue in the future, so structural adjustments linked to the overall tuning of the economy, are both possible and probable. The second part of the article studies the changes in inflation rates, employment and income. A clear positive trend of inflationary pressures emerges, which is in line with the positive development of real income of households per capita. Material and financial resources are tied up in unproductive projects which pushes domestic demand further but the latter is not met structurally by a corresponding supply. The subject of the third part is financial mediation. The lending provided by the banking system is still being held at an unreasonably high level which does not correspond to the structural characteristics of demand. In the end some conclusions are drawn for the inner structural tensions building up in the economy, accompanied by intensifying disequilibrium. There has been made an attempt to formulate adequate macroeconomic management policies with a view to preventing serious economic and financial failures from happening as a result of the overheated to a certain extent Bulgarian economy.
JEL: E22, E27, E66, H30

This paper centers on how after banks in mature economies worldwide failed to manage risk and allocating capital properly, both single national and joint efforts of the EU (with special focus on the Eurozone) were channeled to control the deepening financial crisis since September 2008.
The paper is analyzing the reasons for the financial crisis, simultaneously reviewing the discussions on the profound changes in the global financial system in recent years focusing on the excess capacities created in the system and their consequences (the more rapid growth in financial assets compared to the growth in global GDP, the new institutional structure, complexity in financial instruments, increased counterparty risks etc.). The evolvement of the crisis is presented.
The challenges to the implementation of the USA bail-out program as a response to the crisis are examined. Investigating the common and individual efforts in the EU to control the crisis the decisions of the emergency summit of euro zones nations, the national rescue plans of euro-zone and non-euro-zone countries are studied. The EU stimulus package is evaluated, creating a greater flexibility of Eurozone countries with the Stability and Growth Pact, showing the big differences in the fiscal stances of individual countries, their impact on the contributions to the plan, and the heterogeneity of measures to be applied. Special attention has been put on the recapitalization schemes, the issue on state aid and their long-term impact within the EU. The outcomes of the meeting of G20 are also considered. On the basis of the study main concluding remarks have been drawn.
JEL: E58, F02, G15, G28

Bulgarian stock market experienced sharp and continuous decline in 2008 causing this way a heavy pressure and turmoil among its investors. The decline hit the confidence in the prospects for its development raising a lot of concerns. This paper addresses some questions about the contingency of the Bulgarian stock market on the development of Global Financial Crisis (GFC), the channels and magnitude of negative influence, as well as of the necessary measures to be taken in order to smooth and balance GFC's negative impact
JEL: G01, G18.G34, G38

The fiscal policy of Bulgaria is revealed with regard to the progress made in the process of compliance with the EU requirements for membership and for the preparation for Bulgaria's entry in the EMU. The paper underlines the main trends of fiscal performance that has been an outcome of the Europeanization. Fiscal policy's contribution to the ongoing restructuring of the Bulgarian economy is discussed in the following main aspects: 1)changing the role of government in providing public goods and services; 2)reforming the public revenues and expenditures structure and policies in order to make efficient the use of public resources; 3) better management of public spending policies and improvement of public accountability of the public finances.
On the basis of comparative analysis the paper outlines the problems and the prospects of the fiscal policy with regard to the Bulgaria's preparedness for the entry in the European Monetary Union. Conclusions are drawn as regards: 1) the main factors and trends of the financial restructuring of the public finances; 2)evaluation of the process of the Europeanization of the public finance management.
JEL: E61, E62, E63, F42, H61

The enlargement of the EU in 2004 and 2007 has led to a significant increase in population and territory, but also a huge increase in differences regarding economic structure and development levels. Despite the traditions of the EU in dealing with such differences, the scope of the latest enlargements is a challenge for existing EU policies. In addition, potential additional tensions stemming from further enlargements would be added to the present unsolved debates on the EU budget.
After presenting the current situation and the main challenges regarding the expenditure side of the EU budget, it summarises the results of a recent survey on the perception of experts and decision-makers from different member states regarding EU budget expenditure. This is followed by a summary of the main findings of the same survey regarding preferences for the future; the paper is completed by the conclusions.
JEL: F36, H87

Establishing the currency board arrangement (CBA) in Bulgaria played a key role in overcoming the results of the last and pointed as one of the worst financial and economic crisis. This decision still remains a serious factor for Bulgaria in the terms of European Union membership. Related to the act of accessing EU the obligations Bulgaria undertook, are partially provided by the fiscal stabilization, successfully achieved thanks to the currency board arrangements introduced in the state. Price stability, however, further remains an impediment towards economic policy. It is tightly connected with the next main challenge: to overcome the inner obstacles for fulfilling the Convergence Criterion for a proper entering the Euro zone under the conditions of spreading world-wide financial crisis. This article aims to summarize the recent background which led to the nowadays economic development and related to it future advantages and challenges.
JEL: E42

Many people say that the European Union needs to create a common energy policy. However, only a few of them gives details about its content. In this paper, we examine the global, long term aspects of the European energy situation. We base our proposals for the content of the common energy policy of the EU on the conclusions drawn from this analysis. According to our findings a common energy policy should incorporate foreign policy (including climate change diplomacy), educational policy, R&D policy and setting strict rules for building related energy consumption.
JEL: Q48

The article is trying to analyze the benefits of attracting foreign direct investments (FDI) and the supposed effect on the economic development in Bulgaria. The increase of FDI per capita is important for the penetration and absorption of FDI in the economy, as well as for the creation of new jobs. FDI's accumulation demonstrates the relative increase of the absorptive capacity of the Bulgarian economy. The regressive analysis shows that there is a strong connection between the attracted FDI and the increase of GDP. Despite that FDI are increasing in processing industry and financial intermediation, the last years they are directed to the real estate, building and acquiring industrial, logistic and trade projects or to companies with intermediation or leasing activity. Thought the macroeconomic indicators in Bulgaria are relatively stable, the deficit in the current payment balance is deepening and the attraction of FDI is considered as a source for financial assistance. At present, and regardless of the strong relation between FDI and GDP, it is not possible to affirm that the increase of FDI in Bulgaria is contributing to the development of export-oriented economy. The global financial crisis also is creating an unfavorable economic environment, influencing negatively on the inflows of FDI in Bulgaria and on the economic development.
JEL: F21, F32

In this paper we analyze foreign direct investment (FDI) in China from several points of view. After putting the subject into an historical context, we use time series to illustrate the main trends of capital inflows. Our main finding is that the significant growth of FDI inflows since the beginning of the 1990s can be attributed to two factors: first, the strengthening trust in the irreversibility of the reform process, second, the gradually opening domestic market. The paper also deals with two specific, and very important issues: the so called round-tripping capital, and role of off-shore areas in FDI inflows. We show that these phenomena are strongly linked to each other, and based upon the different handling of domestic and foreign enterprises by the government. Another special feature we try to understand is the large volume of FDI compared to portfolio investments. According to our explanation this is a consequence of the relative backwardness of the Chinese financial system compared to that of in advanced economies, which makes FDI a much safer way of financing than the use of the underdeveloped Chinese capital markets.
JEL: F21