How EU's early diagnosis system will strengthen Ukraine's economy and how to implement it
The economic and financial crisis of 2008 prompted the European Union to introduce an early diagnosis system – the Macroeconomic Imbalances Procedure.
Ukraine must also implement this system on its path toward EU membership in order to make its economy more resilient.
Read more about the importance of this system and the concrete steps Ukraine needs to take in the column by Oleksandra Betlii of the Institute for Economic Research and Policy Consulting: An EU 'check-up': what the macroeconomic imbalances procedure will bring to Ukraine.
The author notes that any economic crisis, especially one as large-scale as that of 2008, does not happen overnight. It matures over a certain period of time in the form of hidden imbalances within the economy.
One of the outcomes of the 2008 crisis was the introduction of various early diagnosis instruments, Oleksandra Betlii adds.
In particular, the IMF introduced a new analytical tool, the Early Warning Exercise, which makes it possible to analyse each country’s economic indicators and build a heat map of vulnerabilities.
In addition, in order to avoid "putting out fires," the European Union created its own early diagnosis system, represented by the Macroeconomic Imbalances Procedure (MIP).
"Within the framework of EU accession negotiations (Chapter 17 'Economic and Monetary Policy'), Ukraine needs to integrate this 'check-up' into its public governance system, which should contribute to greater state resilience," writes the Leading Research Fellow at the Institute for Economic Research and Policy Consulting.
According to her, the Ukrainian government is already preparing the legal framework for introducing the European early diagnosis system, as this is necessary for greater resilience and aligns with Ukraine’s European integration ambitions.
EU regulations defining and governing the Macroeconomic Imbalances Procedure are acts of direct applicability and therefore do not require transposition into national law. However, they do require adaptation of the domestic legislative framework to enable the implementation of reforms.
For Ukraine, the implementation of the Macroeconomic Imbalances Procedure means a transition from "manual" economic management to a system in which every government action is analysed through the lens of resilience.
"We must learn not only to collect statistics for Eurostat, but also to respond in a timely manner to the 'wakeup calls' signaling potential problems in the economy," the author emphasises.
According to her, this system will already be an important element of the European Commission’s oversight of developments in Ukraine after accession to the EU.