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The Microeconomic Dimensions of the Eurozone Crisis and Why European Politics Cannot Solve Them

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  • Christian Thimann

    (Axa - AXA, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper argues there are two main problems holding back private sector employment creation in the stressed eurozone countries. First, there is a persisten competitiveness problem due to high labor costs relative to underlying productivity. Over the first ten years of the euro, wage developments relative to productivity diverged strongly across the eurozone. Second, widespread structural barriers make job creation in these coun- tries far more arduous than in many other advanced economies, and even more arduous than in some key emerging economies and formerly planned economies.

Suggested Citation

  • Christian Thimann, 2015. "The Microeconomic Dimensions of the Eurozone Crisis and Why European Politics Cannot Solve Them," PSE-Ecole d'économie de Paris (Postprint) halshs-01314345, HAL.
    • Handle: RePEc:hal:pseptp:halshs-01314345
    DOI: 10.1257/jep.29.3.141
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    References listed on IDEAS

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    12. Philippine Cour-Thimann, 2013. "CESifo Forum Special Issue April 2013: Target Balances and the Crisis in the Euro Area," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 0(1), pages 05-50, May.
    13. Fiori, Giuseppe & Nicoletti, Giuseppe & Scarpetta, Stefano & Schiantarelli, Fabio, 2007. "Employment Outcomes and the Interaction Between Product and Labor Market Deregulation: Are They Substitutes or Complements?," IZA Discussion Papers 2770, Institute of Labor Economics (IZA).
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    16. Holm-Hadulla, Fédéric & Kamath, Kishore & Lamo, Ana & Pérez, Javier J. & Schuknecht, Ludger, 2010. "Public wages in the euro area - towards securing stability and competitiveness," Occasional Paper Series 112, European Central Bank.
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    Cited by:

    1. Ramon Xifré, 2020. "The Political Value of Internal Devaluation in the Euro Area Crisis," Global Policy, London School of Economics and Political Science, vol. 11(4), pages 466-477, September.
    2. Burda Michael C. & Seele Stefanie, 2017. "Das deutsche Arbeitsmarktwunder: Eine Bilanz," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 18(3), pages 179-204, October.
    3. repec:hum:wpaper:sfb649dp2017-022 is not listed on IDEAS
    4. Fredrik Heyman & Pehr-Johan Norbäck & Lars Persson, 2019. "The Turnaround of the Swedish Economy: Lessons from Large Business Sector Reforms," The World Bank Research Observer, World Bank, vol. 34(2), pages 274-308.
    5. Ignatov Augustin, 2018. "Towards a Confident Europe: Fostering European Foreign Policy as a Premise to Enhanced European Economic Security & Competitiveness," Global Economy Journal, De Gruyter, vol. 18(3), pages 1-13, September.
    6. Mr. Bas B. Bakker, 2015. "Employment and the Great Recession: The Role of Real Wages," IMF Working Papers 2015/229, International Monetary Fund.
    7. Milivojevic, Lazar & Tatar, Balint, 2021. "Fixed exchange rate - a friend or foe of labor cost adjustments?," IMFS Working Paper Series 152, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).
    8. Pasquale Tridico & Riccardo Pariboni, 2018. "Inequality, financialization, and economic decline," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 41(2), pages 236-259, April.
    9. Burda, Michael C., 2016. "The German labor market miracle, 2003-2015: An assessment," SFB 649 Discussion Papers 2016-005, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    10. Jan Skope?ek, 2021. "Impact of Establishing the Eurozone on Economic Performance," International Journal of Business and Management, International Institute of Social and Economic Sciences, vol. 9(2), pages 57-74, November.
    11. Donato Masciandaro & Davide Romelli, 2018. "To Be or not to Be a Euro Country? The Behavioural Political Economics of Currency Unions," BAFFI CAREFIN Working Papers 1883, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    12. repec:hum:wpaper:sfb649dp2016-005 is not listed on IDEAS
    13. Ramon Xifré, 2021. "Non‐Price Competitiveness Factors—A simple measure and implications for the five largest euro area countries," The World Economy, Wiley Blackwell, vol. 44(11), pages 3091-3110, November.
    14. Maria-Grazia Attinasi & Doris Prammer & Nikolai Stähler & Martino Tasso & Stefan van Parys, 2019. "Budget-Neutral Labor Tax Wedge Reductions: A Sumulation-Based Analysis for the Euro Area," International Journal of Central Banking, International Journal of Central Banking, vol. 15(4), pages 1-54, October.

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    More about this item

    Keywords

    microeconomic;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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