8 giugno 2015 - Convergence, divergence and the problems of external imbalances in the European economy
The European Union built up a track record for income and developmental convergence in the decades before the recent economic crisis. There was talk of a successful ‘European integration model of growth and convergence’ which included not only EU member states but also a wider European region strongly integrated with the EU. This lecture will examine the foundations of the integration model and the reasons why it was seriously derailed in the period prior to the crisis. A significant range of lower and middle income economies (‘Europe’s South’) experienced a build-up of unsustainable external imbalances, an accelerating rise in debt positions and distortions in their economic structures to the detriment of a strong tradable sector. Other economies in the EU’s neighbourhood have become largely dependent on a small range of commodity exports and have suffered from a lack of diversification. With hindsight it is clear that the policy framework associated with EU integration (within the Eurozone, but also in relation to the wider European economic space) has to be reshaped to avoid a persistent ‘North-South Divide’ within the European Union and also with countries in its neighbourhood. A significant change of focus is required in policy both at national and EU levels to escape in the post-crisis environment from the ogre of uneven growth and looming imbalances across the European economy which has seriously started to challenge the post-war European integration project as a whole.