Macroeconomic Scenarios for the Euro-Mediterranean Area Quantification based on the GEM-E3 Model

Leonidas Paroussos, Kostas Fragkiadakis, Ioannis Charalampidis, Stella Tsani, Pantelis Capros
2013 unpublished
Leonidas Paroussos, Kostas Fragkiadakis, Ioannis Charalampidis and Stella Tsani are Fellows at ICCS/NTUA-E3MLab-, Athens. Pantelis Capros is the Director of E3M Lab. The authors gratefully acknowledge constructive comments on development of the scenarios and analysis of simulation results provided by Rym Ayadi, Marek Dabrowski, Luc De wolf and the participants of the MEDPRO scientific workshops. Any errors remain the responsibility of the authors. This report was produced in the context of the
more » ... the context of the MEDPRO (Mediterranean Prospects) project, a three-year project funded under the Socioeconomic Sciences & Humanities Programme of DG Research of the European Commission's Seventh Framework Research Programme. MEDPRO Reports present analyses by senior experts on the future of the Mediterranean, drawing upon the foresight exercises underpinning the MEDPRO project and written in a style geared to an informed readership. Unless otherwise indicated, the views expressed are attributable only to the authors in a personal capacity and not to any institution with which they are associated. ISBN 978-94-6138-335-8 Available for free downloading from the MEDPRO ( and CEPS ( websites Abstract Four alternative macroeconomic scenarios for southern Mediterranean countries are quantified in this study with the use of GEM-E3, a general equilibrium model. These are i) the continuation of current policies (business-as-usual scenario), ii) southern Mediterranean-EU cooperation (Euro-Mediterranean Union scenario), iii) a global opening of the southern Mediterranean countries and cooperation with the rest of the Middle East and other developing countries like China (Euro-Mediterranean alliance scenario), and iv) a deterioration in the regional political climate and a failure of cooperation (Euro-Mediterranean under threat scenario). Explicit assumptions on trade integration, infrastructure upgrade, population and governance developments are adopted in each scenario. The simulation results indicate that an infrastructure upgrade and governance improvements in the context of southern Mediterranean-EU cooperation could benefit most of the countries under consideration. The analysis remains important in light of ongoing regional developments and the need to design the best policies to pursue in the aftermath of the Arab spring.