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Eurozone Economies Are Converging

By Sara Patterson
Sara Patterson has a Master’s Degree in political science and enjoys analyzing both current events and the international markets to get a fuller perspective of the currency market. Before turning to financial writing, she taught English writing skills to high-school age students. Sara’s work has been published on various financial and Forex blogs.

ECBThe ECB annual forum began with the idea that the Euro has increased the economic convergence in Europe, a very polemic insight that goes against the current academic consensus.

The idea is elaborated in a report called "20 years of convergence" authored by the economists Jean Imbs and Laurent Pauwels and goes against a report published by Bruegel, a European think tank specializing in economics.

The report claims that the Euro has helped to increase the economic convergence in the last 20 years at a similar or even a higher rate than the United States. A couple of months ago a report published by Bruegel (Promoting sustainable and inclusive growth and convergence in the European Union) claimed that the Eurozone is suffering due to lack of economic convergence and that its social cohesion is currently threatened by those factors.

Bruegel's report claimed that there was an increasing gap between Eastern and South European countries, as the former per capita growth rate was 2% (and went to 4% in the last 15 years) and the latter only could grow 1%. To solve this issue they proposed to enforce the monetary union and to create a fiscal union, setting a budget for the eurozone.

However, this new report, based on different data and a different time frame, claims that the eurozone GDP rates have converged since 1999, reaching a similar level than the United States. The convergence mostly happened before the 2008 crisis but it continued (to a lesser extent) the last decade.

The report didn't mention social cohesion but its data hints that the Euro hasn't helped the Eurozone to improve in this realm. This suggests that the Eurozone should focus on redistributive and social policies that would help to counter this trend.

The ECB annual forum on Central Banking began yesterday and it's taking place on Sintra (Portugal), it's the last one presided by Mario Draghi, who is leaving his post at the end of October.

Sara Patterson
About Sara Patterson
Sara Patterson has a Master’s Degree in political science and enjoys analyzing both current events and the international markets to get a fuller perspective of the currency market. Before turning to financial writing, she taught English writing skills to high-school age students. Sara’s work has been published on various financial and Forex blogs.
 

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