FINANCING GROWTH MODEL CHANGE IN EUROPE´S PERIPHERY

Growth models on the European Unions Eastern periphery have run up against structural constraints. Their FDI-based and export-dependent growth models were predicated on the supply of abundant and cheap labour that made these economies attractive for labour-intensive production with low value-added jobs. However, due to a combination of demographic changes and the EUs open labour market Eastern peripheral economies face shortage of labour in all job categories. Labor shortages not only affect Multinationals, but also small and medium sized enterprises that employ most labour supply. Moreover, with the ongoing digital transformations in the industrial core (especially in the car manufacturing industry), the skill sets needed in Eastern markets change dramatically. Finally, climate change exacerbates Eastern European economies energy and water dependencies. Eastern governments must react to the new economic constraints and launch adjustment programs. Scholars of banking and finance have long argued that there is a direct relationship between a nation`s financial system and the government`s ability to restart the growth engine. Banking and finance are features of social infrastructure that can critically define which businesses and state actors have access to finance, for what duration, as well as the terms of finance that ultimately define their adaptation capacity. Different types of financial systems have different consequences for the political ties between financial markets, industry, and governments that affect the nature of the transformation of the growth models. This research from an international political economy (IPE) perspective - seeks to uncover the role that banking and finance plays in the industrial adjustments of the governments on the European periphery since the global financial crisis until today. The magnitude of change, today, mirrors that of the 1970s in the Western core. However, Eastern governments face two differences. First, global and European banking has shifted from bank-based to market-based banking, with the later seriously narrowing banks ability to finance the real economy. Second, both Banking Union and Capital Markets Union show features that disregard the specificities of Eastern markets making channelling of finance from global markets to Eastern locations more not less difficult. This research maps out the different financial adaptation strategies of Eastern EU member states. It analyses the Baltics banks turn to fintech; Slovakia, Czechia, and Polands retail-focused banks; Hungarys financial nationalism; Romanias regionalization; and Slovenias turn to private banking. Modules within this research examine the interplay between financial systems, political environments, and economic transformations. By unpacking these complexities, the research aims to provide insights that can inform policy decisions and foster sustainable growth in Eastern Europe.

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