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Convergence, Crisis and Unemployment in Europe: The Need for Innovative Policies

Author

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  • Enrico Marelli

    () (Department of Economics and Management, University of Brescia, Italy)

  • Marcello Signorelli

    () (Department of Economics, University of Perugia, Italy)

Abstract

The paper reviews the double crisis that affected the euro area in the recent period. The focal point is that the austerity measures that have been undertaken in the area, especially in the peripheral countries hurt by the sovereign debt crisis, have not only caused a deep recession but are likely to lead to stagnation and persistent unemployment. In the first part of the paper, original weaknesses in the construction of the monetary union are examined, the emphasis being placed on nominal convergence criteria without taking into account the need for real convergence. This analysis is corroborated by some econometric investigations based on sigma and beta convergence for different macroeconomic variables, distinguishing between the pre-crisis period, 1999-2007, and the recent 2008-2013 period. The empirical section continues with a discussion of recent macroeconomic trends focusing on unemployment: it stresses that the deep and prolonged recession can be defeated only by adequate demand management policies. The next section explains how the excessive austerity policies recently carried out have also been caused by wrong assumptions about the size of the fiscal multipliers. The final policy section emphasizes three aspects: (i) the radical reforms, at the European level, necessary if the monetary union is to survive; (ii) the changes in macroeconomic policies required to put an end to the present stagnation; (iii) the different and innovative policies needed to fight the high level of unemployment (especially youth unemployment).

Suggested Citation

  • Enrico Marelli & Marcello Signorelli, 2015. "Convergence, Crisis and Unemployment in Europe: The Need for Innovative Policies," Croatian Economic Survey, The Institute of Economics, Zagreb, vol. 17(2), pages 5-56, December.
  • Handle: RePEc:iez:survey:ces-v17_2-2015_marelli-signorelli
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    References listed on IDEAS

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    1. Hans-Bernd Schäfer, 2012. "The Sovereign Debt Crisis in Europe, Save Banks Not States," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 9(2), pages 179-195, August.
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    Cited by:

    1. Mateusz Pipieñ & Sylwia Roszkowska, 2017. "The Heterogeneity of Convergence in Transition Countries," Lodz Economics Working Papers 7/2017, University of Lodz, Faculty of Economics and Sociology.

    More about this item

    Keywords

    convergence; crisis; unemployment; eurozone; EU policies;

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • J69 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Other
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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