In recent years, not only has the EU objective to close the economic gap between Northern and Southern countries failed, but this gap is ever widening.
Thus, in northern countries, we observe budgetary surpluses, a strong welfare state, and almost zero unemployment and poverty, whereas, in southern countries, we observe excessive government deficits and debt, very high unemployment rates, the retreat of the welfare state, and increasing rates of poverty.
Divergences can also be observed between eurozone and non-eurozone Member States, where Eurozone countries are also bound by the limits of the monetary union.
The European Commission acknowledge this problem (also) in the 2017 Annual Growth Survey and take an important step forward:
“Member States which are over-achieving their fiscal objectives should use their fiscal space to support domestic demand and quality investments, including cross-border ones”.
The Member States are now responsible to take appropriate actions in this direction.
As President of the Eurogroup and in view of the upcoming Eurogroup meeting you will be chairing in December:
– how likely is the possibility that (euroarea) Member States will follow this indication from the Commission?
– Are Member States in the position of implement a real expansionary investment policy keeping the current framework of rules, even though OECD has just recommended a fiscal policy boost to growth and investment?
And as President of the Europgroup do you feel yourself accountable for the lack of implimentation of recommendations addressed to the euro area in view of the increasing divergence between the economies of North and South
Reply
You are very right that over the course of the crisis the process of convergence has become a process of divergence and that is a threat to our community, a threat to our monetary union and needs to be reversed. But i think if you look carefully at growth rates throughout the eurozone at the moment you will see that the process is already being turned around. Growth rates in some of the previous programmed countries, are now at the highest level….in Ireland, in Spain, in Cyprus…economic recovery is ongoing at high growth rates…higher than in the core countries…does that require further steps in terms of reforms following up the countries specific recommendations? Absolutely. Is that the key challenge for national politicians? Yes because all of us are being challenged at home..where are the results? And why are they not effective? What are you doing to provide new opportunities to people now that we are moving out of the crisis. So this is a difficult phase because people expect results and we have been slow coming out of the crisis. But the return of the convergence processes actually begining to show because there are interesting differences in growth rates and economic dynamics throughout the eurozone. By the way I do feel that core countries should also be able to achieve higher growth rates 1% in some of the larger economies in the eurozone is simply not good enough.
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