Beyond Financial Regula0on

Transcription

1 Beyond Financial Regula0on European Industrial Policies in the Wake of the Global Financial Crisis 22 AND 23 NOVEMBER 2013 BARCELONA, SPAIN CONFERENCE

2 Beyond Financial Regula0on: European Industrial Policies in the Wake of the Global Financial Crisis OPENING How to get Europe growing again: Industrial Policies, Innova0on and Finance Ernst SteMer, Secretary General of the Founda3on for European Progressive Studies (FEPS) Roçio MarOnez- Sampere, Secretary of the Economic Area of the Catalan Socialist Party (PSC) and member of the Catalan Parliament Pere Navarro, First Secretary of the Catalan Socialist Party (PSC)

3 Beyond Financial Regula0on: European Industrial Policies in the Wake of the Global Financial Crisis PRESENTATION Queries, the European Progressive magazine Ernst SteMer, Secretary General of the Founda3on for European Progressive Studies (FEPS) Antonio González, Journalist at Economistas frente a la crisis

4 Beyond Financial Regula0on: European Industrial Policies in the Wake of the Global Financial Crisis KEY NOTE SPEECH Towards Financially Sustainable Prosperity Jan Toporowski, Professor at the Department of Economics at SOAS, University of London

5 Summary 1. The crisis of industrial financing. 2. What I hope to get out of this discussion.

6 The Metamorphoses of financial crisis From American sub- prime borrowers Through the crisis of investment banking To the crisis of government financing in Europe and North America Requiring emergency financing by goverments for banks and other governments; Spreading the crisis of government financing.

7 But Keynesian & Monetarist disputes over government financing should not obscure the crisis in industrial financing

8 The Crisis in Industrial Financing Started in 2000s with merger & takeover boom (including private equity) financed with short- term paper Arcelor- MiZal, GEC, Rio Tinto planned to refinance short- term borrowing in equity market

9 The Crisis hit in 2008 Inter- bank market froze up in 2008, preven3ng roll- over of debt; Equity market blocked by crisis and queue of forced equity issues by banks; Quan3ta3ve Easing saved banks; But QE (in Europe LTRO) brought money market into the central bank.

10 Industry responds Faced with squeeze on short- term & equity financing Firms cut back planned investments, by up to two thirds. Deleveraging (debt repayment) vs. Liquidity preference (Non- financial in S&P500 hold $1.27tn in liquid assets)

11 Debt counterparts Industrial holdings of liquid assets concentrated among largest & most profitable companies Counterpart in indebtedness of governments and SMEs Indebtedness forced by income deficit of governments & SMEs.

12 Government Policy Welfare- to- infrastructure switch in UK; vs. Luxemburgist (export- led) policy of Germany. Debt liquida3on by government must reduce na3onal income and industrial liquidity, unless business is willing to indebt itself by the same amount

13 What I hope for from discussion Can innova3on generate recovery? Who will do it and what kind of financial balance sheet will they require? Can indebted governments conduct industrial policy (other than neo- liberal deregula3on and paying private profits on public services)? Industrial financing that finances industry rather than financing finance.

14 Beyond Financial Regula0on: European Industrial Policies in the Wake of the Global Financial Crisis SESSION 1 Economic Growth and Innova0on What is innova2on and how does it come about? What is the nexus between innova2on and growth in Europe? What kind of structural policies are needed in Europe to s2mulate innova2on and technological development of SMEs and of large enterprises in Europe? Maurici Lucena, economist and spokesman of the Socialist Parliamentary Group in the Catalan Parliament Josep Maria Rañé, unionist, former Minister of Labour and Industry of the Government of Catalonia and current president of the Economic and Social Council of Catalonia Michele Mastroeni, Innogen Research Fellow at the University of Edingburgh, Scotland Chaired by Francesc Trillas, Lecturer of Economics at the Univeritat Autònoma de Barcelona

15 Beyond Financial Regula0on: European Industrial Policies in the Wake of the Global Financial Crisis SESSION 1 Economic Growth and Innova0on What is innova2on and how does it come about? What is the nexus between innova2on and growth in Europe? What kind of structural policies are needed in Europe to s2mulate innova2on and technological development of SMEs and of large enterprises in Europe?

16 Beyond Financial Regula0on: European Industrial Policies in the Wake of the Global Financial Crisis LUNCH See you back at 15:45

17 Beyond Financial Regula0on: European Industrial Policies in the Wake of the Global Financial Crisis KEY NOTE SPEECH Ricard Torrell i Blanquer, Director at AISA- Nodus Barberà and Founding Member of the Founda3on Rafael Campalans and member of the FEPS Next Leg Research programme

18 Beyond Financial Regula0on: European Industrial Policies in the Wake of the Global Financial Crisis SESSION 2 Industrial Policies and the Role of the State What is meant by industrial policy? What is the rela2ve role of the state and the market in promo2ng innova2on industrial development? What are the characteris2cs of a European entrepreneurial state? John Grahl, Professor of European Integra3on at Middlesex University, United Kingdom Raül Blanco Díaz, Professor of Applied Economy, University of Barcelona José Mon0lla, senator, former Minister of Industry, Tourism and Trade of the Spanish Government and President of the Government of Catalonia. Joan Majó, former Spanish Minister of Industry and Energy and European Commission Advisor, Spain Chaired by Giovanni Cozzi, Economic Advisor at the Founda3on for European Progressive Studies (FEPS)

19 Beyond Financial Regula0on: European Industrial Policies in the Wake of the Global Financial Crisis SESSION 2 Industrial Policies and the Role of the State What is meant by industrial policy? What is the rela2ve role of the state and the market in promo2ng innova2on industrial development? What are the characteris2cs of a European entrepreneurial state?

20 Why industry? Raül Blanco, Universitat de Barcelona Beyond the Financial Regula0on Seminar Barcelona, November 22 nd 2013

21 1. Why industry? 2. Is it really a priority? 3. Proposals for the future

22 Why industry?

23 Industry is essen0al for the economic structure Weight of Industry and Production Services (% of GDP, 2011) Lituània Rep Txeca Polònia Letònia Catalunya Bulgària Eslovènia Eslovàquia Hongria Estònia Països Baixos Àustria Alemanya Bèlgica Suècia Romania Malta Espanya Itàlia Dinamarca Finlàndia Grècia França % VAB de la indústria (1) % VAB del serveis a la producció (2) (1) Includes manufacturing, extrac0ve industries, energy and water. (2) Includes professional, technical and scien0fic ac0vi0es; financial ac0vi0es; commerce, repair and transport; and IT. Source: BLANCO R., POVEDA C. Anàlisi comparada dels factors de compe33vitat a la indústria catalana. Memòria Econòmica de Catalunya Consell General de Cambres, 2013.

24 Industry is essen0al for the economic recovery I Industrial GVA vs. Unemployment Rate in EU- 27 (2010) 25 EU- 27 Belgium Unemployment rate (%) Bulgaria Czech Republic Denmark Germany Estonia Ireland Greece Spain France Croatia Italy Latvia Lithuania Hungary Netherlands GVA Industry, including Energy (% GDP) Austria Poland Portugal Source: Eurostat, 2010

25 Industry is essen0al for the economic recovery II Source: Estudio para el fortalecimiento y desarrollo del sector industrial en España. The Boston Consul3ng Group, 2013.

26 Industry is essen0al for the economic recovery III

27 Industry is essen0al for the economic recovery IV Source: Estudio para el fortalecimiento y desarrollo del sector industrial en España. The Boston Consul3ng Group, 2013.

28 Industry is essen0al for the economic recovery V Source: CLAVES DE LA COMPETITIVIDAD DE LA INDUSTRIA ESPAÑOLA. PWC Siemens, 2013.

29 Industry is essen0al for the economic recovery VI Spanish industry has a level of produc0vity per worker 34.1% lower than the EU average. Any addi3onal 10% increase of the Spanish Industry produc3vity would mean +0.33% of GDP growth. Matching the EU average would mean +1.13% of GDP growth. Spanish industry invest in R&D only 0.84% of total produc0on, lower than the 1.5% of the EU average. Any addi3onal 10% increase of the Spanish Industry investment on R&D would mean +0.13% of GDP growth. Matching the EU average would mean +1.17% of GDP growth. Source: CLAVES DE LA COMPETITIVIDAD DE LA INDUSTRIA ESPAÑOLA. PWC Siemens, 2013.

30 Industry is essen0al for the economic recovery VII Future elements to keep in mind

31 Industry is essen0al for our model of society I Industry produces social and cultural spillovers 1. Increase of the quality of the democracy 2. Long term loyal3es 3. Innova3on in industry is based on team projects 4. Increase social cohesion in comparison with a financial economy 5. Environment and low- emissions ally Source: BLANCO R., POVEDA C. Anàlisi comparada dels factors de compe33vitat a la indústria catalana. Memòria Econòmica de Catalunya Consell General de Cambres, 2013.

32 Industry is essen0al for our model of society II

33 Is Industry truly a priority?

34 Priority in Spain? Spanish Government budget in R&D (including civil and military, in M) Source: Secretaría de Estado de Presupuestos y Gastos hmp:// ES/Areas%20Tema0cas/Presupuestos%20Generales%20del%20Estado/Paginas/Presupuestos.aspx

35 Priority in Spain? Spanish Government budget in Industry and Energy (in M) Source: Secretaría de Estado de Presupuestos y Gastos hmp:// ES/Areas%20Tema0cas/Presupuestos%20Generales%20del%20Estado/Paginas/Presupuestos.aspx

36 Proposals for the future

37 Main target Recover the 90 s industrial weight in the GDP. During the 90 s, European Industry represented 20% of GDP, in 2011 only 16%. The same applies to Spain and Catalonia. In 1990, Catalan Industry weighted 30% of the total GVA, now only 21% ater 20 years of con0nuous decreasing.

38 Some prac0cal measures for low- cost 0mes (in Spain) 1. Measures to increase companies dimension Gather resources on coopera0ve and high- impact projects: Big companies + SMEs + R&D Centres Foster cluster policies, a cheap way to join forces and gain dimension to develop common projects in a global market. 2. Increase the presence of Spanish industry in the EU Programs Repeat the success story of research centres and research grants. 3. Invest in educa0on, specially in Dual training educa0on which is very relevant for the industrial sector.

39 Memòria Econòmica de Catalunya 2012 Consell General de Cambres de Catalunya Anàlisi comparada de factors de compe00vitat de la indústria catalana Raül Blanco, Universitat de Barcelona Carme Poveda, Cambra de Comerç de Barcelona

40 Thank you very much for your amen0on Raül Blanco, Universitat de Barcelona es.linkedin.com/in/blancoraul

41 Beyond Financial Regula0on: European Industrial Policies in the Wake of the Global Financial Crisis CLOSING Miquel Iceta, President of the Founda3on Rafael Campalans

42 Beyond Financial Regula0on: European Industrial Policies in the Wake of the Global Financial Crisis OPENING Giovanni Cozzi, Economic Advisor at the Founda3on for European Progressive Studies (FEPS)

43 Beyond Financial Regula0on: European Industrial Policies in the Wake of the Global Financial Crisis KEY NOTE SPEECH Role of Financial Sector and Macro- Policies for European Recovery and Growth Stephany Griffith- Jones, Financial Markets Director at the Ini3a3ve for Policy Dialogue (IPD) at Columbia University

44 Func3ons of the financial system Finance inclusive growth Avoid causing costly crises Financial sector has done neither To finance real economy, new structure of financial sector needed, including public development banks. Efficient public development banks essen3al complement to private finance Great urgency to have a financial sector that facilitates investment, for countries to compete in world economy To avoid crises, far stronger financial regula3on needed to avoid financial sector being Achilles Heel of market economy

45 Financial regula3on Major efforts done on financial regula3on since 2007/2008 crisis Limited by pushback by financial sector. Large financial sector not just a problem in macro terms, but even more in poli3cal economy terms Will regulatory changes be enough to avoid future crises?

46 Improving the alloca3on of financial resources for produc3ve development requires a larger scale and role for N/R/MDBs.This includes Strengthening the provision of produc3ve finance, to support development strategies through: Direct lending Ø Financing large infrastructure/other projects. Ø Strengthening public sector capabili3es Indirect lending Ø Deeper levels of financial inclusion for SMEs and households. Ø Deeper levels of financial inclusion for innova3on and entrepreneurship. Countercyclical ac3ons to support macro- financial stability Ø Maintain the stability in the flow of produc3ve finance. Ø Support the development of countries counter- cyclical macro mechanisms. Addressing global challenges such as climate change mi3ga3on and adapta3on

47 Enhancing the development potential of allocations towards public sector Priori3zing sectors, in the framework of so called industrial policies in different sectors: Ø Public investment in infrastructure; support for innova3on in other sectors Ø Ins3tu3onal and capacity building Mobilizing broader resources with mechanisms for doing more with less Ø Blending of loans and grants(or subsidies), where appropriate Ø Leverage resources

48 Source: Own elabora3on Need for bezer coordina3on at the ins3tu3onal level Regional Development Bank, EIB Coordinate response of RDBs to na0onal development objec0ves Ways to respond to priori0es defined by na0onal authori0es Sectorial priori0es Infrastructure and produc0ve development Social development Ins0tu0onal and capacity building Na0onal Development Bank

49 A third item on N/R/MDBs development agenda involves counter- cyclical ac3ons: This involves: Ø Maintaining the stability in the flow of produc3ve finance through: ü Direct lending at 3mes of distress, so investment projects can con3nue. ü Enhancing the domes3c financial system s capacity to mi3gate the pro- cyclical behavior of credit. Ø Fostering the development of countries counter- cyclical ex- ante macro ins3tu3onality.

50 The evidence on countercyclicality bit unclear. However, in the global financial crisis ( ), all N/R/MDBs behaved countercyclically Commitments (million USD) 40,000 32,000 24,000 16,000 8,000 0 MDB s Non- Concessional Financial Assistance and GDP growth by regions IFC 48,000 IBRD GDP growth (%) Commitments (million USD) 14,000 12,000 10,000 8,000 6,000 4,000 2, GDP growth (%) Commitments (million USD) IDB 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2, GDP growth (%) Commitments (million USD) CAF 12,000 10,000 8,000 6,000 4,000 2, GDP growth (%) Source: MDBs annual reports and World Development Indicators Commitments GDP annual growth rate (%)

51 The evidence on countercyclicality bit unclear. However, in the global financial crisis ( ), all N/R/MDBs behaved countercyclically 10,000 AfDB 12 12,000 AsDB 8 Commitments (million USD) 8,000 6,000 4,000 2, GDP growth (%) Commitments (million USD) 10,000 8,000 6,000 4,000 2, GDP growth (%) ,000 EBRD 10 12,000 8 Commitments (million USD) 10,000 8,000 6,000 4,000 2, GDP growth (%) Commitments GDP annual growth rate (%) Source: MDBs annual reports and World Development Indicators

52 Lessons from the global crisis on the countercyclical response by N/MDBs N/RDBs small capital base oten cons0tuted a limita0on to their countercyclical response Ø Most N/RDBs needed to have their capital base increased Ø Need for higher levels of capital? Or increase lending capacity via higher leverage, where feasible? Dynamics of rapidly expanding commitments were not always reflected in actual disbursements Ø Need to create ex ante mechanisms for fast disbursements during crises, especially mechanisms for financing SMEs

53 Disbursements by MDBs did not respond to the crisis as fast as did commitments ALL COUNTRIES (USD Billions) Change COMMITMENTS World Bank IBRD % World Bank IDA % IFC % IDB % AfDB % AsDB % EBRD % CAF % TOTAL COMMITMENTS % DISBURSEMENTS World Bank IBRD % World Bank IDA % IFC % IDB % AfDB % AsDB % EBRD % CAF % TOTAL DISBURSEMENTS % Source: On the basis of Ocampo, Griffith- Jones et al (2010) p. 49 and annual reports of EBRD, IFC and CAF

54 N/R/MDB s role in suppor0ng the development of countries counter- cyclical macro- mechanisms Ø Become market- makers for instruments that help stabilize Government s spending through the cycle (eg. GDP indexed bonds) Ø Become market- makers for instruments in local currency, eg (lowering countries currency mismatches Ø Introducing lending instruments that make countries less vulnerable during crises Ø eg. adjust repayments of loans in a counter- cyclical manner, so that net lending can increase more in bad 3mes Ø Increase co- financing in bad 3mes

55 Role of EIB in European crisis Increased lending significantly in first phase of the crisis Paid- in capital doubled in 2012; increase equal to Eu 10 Bn; can lead to Eu 80 Bn new lending Means financing total for up to Eu 160 Bn Major increase of GDP and employment Proposal: further increase of Eu 10 Bn paid- in capital of EIB, for green investment and innova3on

56 R/NDB s role in the mobiliza0on of financial resources for climate change N/RDBs can and should play an important role in mobilizing resources for climate change mi3ga3on and adapta3on: Ø Ø Ø Ø Ø Through use of a range of instruments to fund climate change interven3ons Key role due to massive environmental externali3es Catalyzing climate change investments by the private sector Include higher price of carbon in project evalua3ons, as EIB does Blend na3onal budget and Structural Fund resources, where needed, with EIB and NDB lending, plus private investment

57 Complementary role by na3onal development banks German KfW, second largest commercial bank, highly effec3ve and profitable France just created new public development bank; UK Labour Party commized to create Bri3sh Investment Bank Key for countries like Spain to expand and improve exis3ng development bank, ICO, as well as other public financial ins3tu3ons. Use them to finance industrial strategy, counter- cyclical lending, and help fund green economy

58 Beyond Financial Regula0on: European Industrial Policies in the Wake of the Global Financial Crisis SESSION 3 European and Na0onal Policies for post- Crisis Recovery What ins2tu2onal changes and policies are needed at European and na2onal level in order to foster innova2on and to reindustrialise Europe? What kind of ins2tu2onal changes and financial sector policies will stabilise banking systems and create a sounder economic environment in which banks could operate? What is the role of mul2lateral, regional and na2onal development banks in fostering innova2on and growth in Europe? MaMhias Kollatz- Ahnen, Senior Expert at PricewaterhouseCoopers, Germany Francesco Garibaldo, Director of the Is3tuto per Lavoro (IPL) Daniela Gabor, Senior Lecturer in Economics at the University of the West of England Sonia Sánchez- Quitela, Consultant- Economist at the World Bank Chaired by Carles Rivera, Economist and lecturer at the University Pompeu Fabra

59 Beyond Financial Regula0on: European Industrial Policies in the Wake of the Global Financial Crisis SESSION 3 European and Na0onal Policies for post- Crisis Recovery What ins2tu2onal changes and policies are needed at European and na2onal level in order to foster innova2on and to reindustrialise Europe? What kind of ins2tu2onal changes and financial sector policies will stabilise banking systems and create a sounder economic environment in which banks could operate? What is the role of mul2lateral, regional and na2onal development banks in fostering innova2on and growth in Europe?

60 Beyond Financial Regula0on: European Industrial Policies in the Wake of the Global Financial Crisis SESSION 4 Industrial Financing How industrial policies and industrial processes have been shaped by financialisa2on in the lead- up to the crisis? How can finance be reformed so that it can foster innova2on and reindustrialisa2on in Europe? Florence Palpacuer, Professor of Management Science, Université Montpellier 1, France Joachim Becker, Vienna University of Economics and Business, Austria Lluís Torrens Mèlich, Manager of the Public- Private Sector Research Center IESE Business School, University of Navarra Chaired by Susan Newman, Economists and Senior Lecturer at Interna3onal Ins3tute for Social Studies (ISS) of the Erasmus University RoZerdam

61 Financializa3on, de- territorializa3on of global value chains and implica3ons for development a case study of innova2on in a microelectronics cluster in France Montpellier Research in Management Nicolas BALAS Florence PALPACUER

62 Outline The case study The territorial embeddedness of innova3on under ques3on Research methods Conflic3ng views of possible futures Uncertain future of the poli3cal compromise

63 1. The case study THE CROLLES 2 ALLIANCE Local strategic alliance between 3 global chip makers : clustering in the French Silicon Valley Upgrading of the local industrial base è Longer- term and more ambi2ous technological program expected The break up of the C2A : strategic controversy over GVC governance pazerns 90s- 2000s Local economic development model challenged è Rise of mul2ple poli2cal contesta2ons: maintaining vs. reloca2ng R&D ac EURAM 2013

64 2. The territorial embeddedness of innova2on under ques2on CHALLENGING DETERMINISTIC APPROACHES Porterian cluster theory Physical proximity as a facilitator for complex knowledge Compe33on between places è Roman2c (vis- à- vis power issues) and over- territorialized (vis- à- vis GVCs) view The industrial upgrading paradigm of GVCs Modularity as an incen3ve to outsourcing and offshoring Adap3ng local skills to the dominant governance pazerns of the GVC è Naturaliza2on of the idea of globaliza2on and of exis2ng hierarchies EURAM 2013

65 2. The territorial embeddedness of innova2on under ques2on BRINGING POWER AND INSTITUTIONS BACK IN The variety of capitalism thesis è State poli2cal strategie s influence on GVCs governance pa_erns Renewed social movement ac0vism è Challenging the power of MNCs and their loca2onal choices Hegemony and resistance: neo- gramscian approaches è Ideology, concrete social forma2ons, material world è Poli2cal struggles aiming at influencing on the ground the condi2ons under which the loca2onal decision will be taken EURAM 2013

66 3. Research methods A GROUNDED THEORY METHODOLOGY Data collec0on è PhD project: è Semi- structured itws: 35 è Extensive review of non- technical literature (press releases, specialized press, trade union archives ) Data analysis è A construc2vist grounded theory strategy (perceived events, judgments and cri2ques) è Coding schemes: iden2fica2on of 4 main narra2ves / 7 stakeholder groups EURAM 2013

67 4. Conflic2ng views about possible futures GOING FAB- LESS: CREATING SHAREHOLDER VALUE CONTEXT Industry analysts Ins2tu2onal investors Financializa0on LBOs INTER/ACTIONS Freescale Lab- fab model STMicroelectronics NXP Crolles 2 Alliance break- up CONSEQUENCES EURAM 2013 Fab- less Offshoring towards South- East Asia TSMC

68 4. Conflic2ng views about possible futures BUILDING AN AIRBUS FOR MICROELECTRONICS US technological dependency China catching up strategy CONTEXT Lack of industrial ambi0on INTER/ACTIONS Infineon European Microelectronics STMicroelectronics NXP Borel proposal Lack of legi2macy CONSEQUENCES EURAM 2013 Media discredit Failure of its ver3cal integra3on impera3ve Lack of poli0cal support Too technical for re- industrializa3on stakes

69 4. Conflic2ng views about possible futures SHIFTING TO A DEMOCRATIC & ECOLOGICAL ECONOMY CONTEXT Lack of democracy discourse Waste of public resources Environmental damages Local development model failure INTER/ACTIONS ADES Alterna0ve social movements PMO OFIPOPU CONSEQUENCES EURAM 2013 Poli2cal elites Exclusion from locus of decision- making Scien2fic elites Industrial elites

70 5. Uncertain future of the poli2cal THE FAB- LIGHT SOLUTION compromise Ins2tu2onal investors Priva2za2on and liberaliza2on reforms CONTEXT «State- led» Financializa0on Labor Unions «Chaudron grenoblois» Engineering elite INTER/ACTIONS Local poli2cal elite CONSEQUENCES Fab- light Compromise Externaliza3on of process technologies IBM Fab club EURAM 2013

71 5. Conclusion Possible futures for C2A echoed various views of GVCs Airbus scenario: East- Asian industrial development strategy Fab- less scenario: American model of industrial organiza3on Exit scenario: limits of commodity chains? Lack of clear vision for the «fab- light» compromise Socially / poli3cally constructed nature of loca3onal choices for innova3on ac3vi3es in GVC

72 Financialisa3on, dependent export industrialisa3on and de- industrialisa3on in Eastern Europe Joachim Becker, Predrag Ćetković, Rudy Weissenbacher (Vienna University of Economics and Business)

73 Early transforma3on phase # Slovenia: pro- industrial policies in neo- corpora3st framework # Bal3c countries: pro- financialisa3on policies with an3- industrial bias in neo- liberal framework # Other countries: shock without therapy resp. gradualism without therapy

74 Group a: since late 1990s Visegrád countries & Slovenia # Export industrialisa3on & dependent financialisa3on # Export industrialisa3on based on FDI (except for Slovenia); complex industries, but with lizle R&D and with low wages # Rela3vely rapid expansion of private household credits, mostly in na3onal currency (except for Hungary) # Vulnerabili3es in crisis: mainly narrow export dependence; in Hungary and Slovenia also consequences of financialisa3on

75 Group b: since late 1990s Bal0c and Southeastern European countries # Financialisa3on main motor of pre- crisis model Very rapid increases of private household foreign exchange debt in pre- crisis years # Rela3vely lizle FDI in manufacturing (mainly low technology and low wage sectors); Latvia & Estonia: expanding wood industries; neglected inward- looking industries # Exchange rate detrimental for industries, extreme current account deficits in pre- crisis years # Vulnerabili3es in crisis: mainly through the financial channel; very strong impact

76 Alterna3ves # Visegrád countries: diversifica3on as main challenge; need for more own R&D # Southeastern Europe: rehabilita3on of inward- looking industries; reduc3on of informal euroisa3on and regaining exchange rate flexibility and more general policy spaces as pre- condi3ons of pro- industrial and pro- development policies

77 Beyond Financial Regula0on: European Industrial Policies in the Wake of the Global Financial Crisis SESSION 4 Industrial Financing How industrial policies and industrial processes have been shaped by financialisa2on in the lead- up to the crisis? How can finance be reformed so that it can foster innova2on and reindustrialisa2on in Europe?

78 Beyond Financial Regula0on: European Industrial Policies in the Wake of the Global Financial Crisis CLOSING Esther Niubó, Director of the Founda3on Rafael Campalans