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How to deal with economic divergences in EMU?

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Abstract

Since the launch of the euro, persistent and even rising disparities among member states have made it difficult to implement short-term or structural common economic policies. The article gives an overview of Euro area disparities in terms of growth and inflation and imbalances, mainly unemployment and current accounts. Four explanations are considered: the benefits of the single currency for catching-up countries, the weaknesses of the Euro area economic policy framework; the implementation of non-cooperative domestic policies which have induced excessive competition and insufficient coordination and hurt mainly the larger economies; and the crisis of the European continental model in a global world. Four strategies are discussed: increasing market flexibility; moving towards the knowledge society of the Lisbon Agenda; re-nationalising economic policies; and introducing a more growth-oriented policy framework.
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  • Catherine Mathieu & Henri Sterdyniak, 2007. "How to deal with economic divergences in EMU?," Documents de Travail de l'OFCE 2007-14, Observatoire Francais des Conjonctures Economiques (OFCE).
  • Handle: RePEc:fce:doctra:0714
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    References listed on IDEAS

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    1. Catherine Mathieu & Henri Sterdyniak, 2003. "Réformer le pacte de stabilité : l'état du débat," Revue de l'OFCE, Presses de Sciences-Po, vol. 84(1), pages 145-179.
    2. Charles Wyplosz, 2006. "European Monetary Union: the dark sides of a major success," Economic Policy, CEPR;CES;MSH, vol. 21(46), pages 207-261, April.
    3. Gilles Saint-Paul, 2004. "Why are European Countries Diverging in their Unemployment Experience?," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 49-68, Fall.
    4. Romain Duval & Jørgen Elmeskov, 2005. "The Effects of EMU on Structural Reforms in Labour and Product Markets," OECD Economics Department Working Papers 438, OECD Publishing.
    5. Perotti, Roberto & Alesina, Alberto, 2004. "The European Union: A Politically Incorrect View," Scholarly Articles 4553004, Harvard University Department of Economics.
    6. Alberto Alesina & Roberto Perotti, 2004. "The European Union: A Politically Incorrect View," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 27-48, Fall.
    7. Jacques Le Cacheux, 2005. "Politiques de croissance en Europe. Un problème d'action collective," Revue économique, Presses de Sciences-Po, vol. 56(3), pages 705-713.
    8. Alan Ahearne & Jean Pisani-Ferry, 2006. "The Euro: only for the agile," Policy Briefs 42, Bruegel.
    9. André Sapir, 2006. "Globalization and the Reform of European Social Models," Journal of Common Market Studies, Wiley Blackwell, vol. 44(2), pages 369-390, June.
    10. Lane, Philip R., 2006. "The Real Effects of EMU," CEPR Discussion Papers 5536, C.E.P.R. Discussion Papers.
    11. Nicholai Benalal & Juan Luis Diaz del Hoyo & Beatrice Pierluigi & Nikiforos Vidalis, 2006. "Output growth differentials across the euro area countries - some stylised facts," Occasional Paper Series 45, European Central Bank.
    12. Mongelli, Francesco Paolo & Vega, Juan Luis, 2006. "What effects is EMU having on the euro area and its member countries? An overview," Working Paper Series 599, European Central Bank.
    13. Servaas Deroose & Sven Langedijk & Werner Roeger, 2004. "Reviewing adjustment dynamics in EMU: from overheating to overcooling," European Economy - Economic Papers 2008 - 2015 198, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
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    Cited by:

    1. Catherine Mathieu & Henri Sterdyniak, 2008. "European social model(s) and social Europe," Documents de Travail de l'OFCE 2008-10, Observatoire Francais des Conjonctures Economiques (OFCE).
    2. Catherine Mathieu & Henri Sterdyniak, 2010. "European Debt Crisis and Fiscal Exit Strategies," Sciences Po publications 2010-11, Sciences Po.
    3. Antônio Albano De Freitas, 2016. "Crisis, Profit Rate And The Political Economy Of The Eurozone," Anais do XLII Encontro Nacional de Economia [Proceedings of the 42nd Brazilian Economics Meeting] 010, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].

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    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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