Why Does the Euro Area Have Such Low Growth and High Unemployment?

By Philip Arestis, University of Cambridge, and Malcolm Sawyer, Professor of Economics, University of Leeds. Originally published at Triple Crisis

Since the euro was adopted as a virtual currency in 1999 (and the exchange rates between the currencies of the then 11 countries fixed en route to adopting the euro), growth among the euro-area countries has been lacklustre. The euro-area annual growth rate was just under 2% in 2002 to 2007, followed by 0.3% in 2008, -4.5% in 2009, then 2% in 2010, and an average of 0.8% 2011 to 2016. Over the period 1999 to 2016, the average was 1.1%. Unemployment declined through to 2007 down to  7.5%, then rose in the aftermath of the financial crises and the effects of fiscal austerity programmes to 12% in 2013, and has gently declined since to 10% in 2016 and likely to come close to 9% at the end of October 2017. There are notable disparities between different countries’ experiences, with Italy’s growth 1998 to 2016 being an annual average rate of 0.2%, and unemployment in Greece over 23% and Spain close to 20% in 2016.

The economic difficulties of many of the now euro-area counties had been noted in the early 1990s. In the late 1980s, all the talk was of the “single market” and the removal of non-tariff barriers to boost trade between member countries and to stimulate economic activity. The EC forecast a 6% boost to GDP following the single market. The launch of the single currency had a whole range of political forces behind it, but was viewed as enhancing economic integration and giving some boost to trade between member countries. “Structural reforms” of labour and product markets (for which read de-regulation and liberalisation) have been frequently promoted as lowering unemployment and improving economic performance. Writing in 2008, the European Commission (2008, p. 6) claimed that “the bulk of these improvements [in the reduction of unemployment] reflect reforms of both labour markets and social security systems carried out under the Lisbon Strategy for Growth and Jobs and the coordination and surveillance framework of EMU, as well as the wage moderation that has characterised most euro area countries.” The ECB amongst others has been consistent in its calls for “structural reforms,” and the promotion of “structural reforms” have become as a significant part of the “fiscal compact.”

These major policies (single market, single currency, “structural reforms”) have all been promoted as enhancing economic performance. Yet the economic performance of the euro area in particular has been anaemic to say the least, and these policy “pushes” have not been self-evidently successful. The supposed stimulus to trade between EU member countries was rather muted, and indeed trade within the EU grew less quickly that trade between EU and the rest of the world. Over the period 2002-2016, trade between EU member countries grew (in nominal terms) by around 65%, while trade between EU countries and the rest of world grew by around 90%. In two earlier blog posts (here and here) and in other writings (e.g. Arestis and Sawyer 2013) we have argued that many of the “structural reforms” have detrimental effects on inequality and productivity. “Reforms” attacking the level of minimum wages and undermining the position of trade unions exacerbate inequality. “Reforms” attacking employment protection and security of employment do not help to foster training and innovation. Indeed, “structural reforms” were promoted to reduce “structural unemployment” and yet it is notable that (on the OECD’s estimates) the rate of “structural unemployment” in 2016 was 8.9%, compared with an average of 9.0% in the period 1992-2001, and 9.1% over 2002=2011.

The operations of the euro area (and the Economic and Monetary Union) are hampered by restrictive fiscal policies which strive (often unsuccessfully) for balanced budgets (and for some under the excessive deficit procedure budget surpluses). The attempt at a uniformity of fiscal policy (with the common aim of a “balanced structural budget”) cannot take into account the differing needs of countries for infrastructure investments nor does it take into account the differing economic circumstances of countries.

The adoption of the euro took place without any thought to the current-account imbalances between the member countries, and without any perspective on the sustainability of those imbalances. The single currency is a fixed-exchange-rate system (between the member countries) par excellence without possibilities of exchange-rate adjustments to address the current-account imbalances other than internal deflation designed to reduce domestic prices. The current-account imbalances grew in the first decade of the euro, with associated capital flows between countries. In the second decade of the euro, current-account deficits were drastically reduced as internal deflation brought imports down. But the underlying pattern of imbalances has not been resolved, and countries with high unemployment seeking a return to prosperity will face severe constraints from their current-account position.

There are no doubts, and many reasons, for the poor performance of most of the euro-area economies. Yet the austerity policy agenda (from the Stability and Growth Pact, the “fiscal compact,” etc., with the drives for balanced budgets), the pursuit of “structural reforms,” and the failures to address the current account constraints on euro-area member countries have all contributed to the lacklustre economic performance.

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  1. PlutoniumKun

    In many ways I think the Euro project shared some characteristics with Brexit – a utopian idea promoted hard by people who refused to engage with the hard nuts and bolts of what it would actually mean in practice. I believe some of the architects of the Euro were quite explicit in acknowledging the problems in its design, but believed that it would work further down the line crisis by crisis – in other words, they knew it was a lousy design, but felt that once in place the inevitable financial crises it would create would provide an environment for its design to be improved – most likely by forcing the richer EU countries to cough up more money for weaker regions (as happens in other large diverse currency areas, like the US or China).

    But instead, the crisis actually strengthened the hands of economic reactionaries. The Germans in particular never really bought into the Euro, but instead of being dragged along reluctantly to make it work, they gained enough power to if anything make it even more damaging for everyone but themselves (since German industry has benefited greatly from its relative weakness).

    Going back 7 or 8 years, many of the more practical critics of the Euro – writers like Michael Pettis – usually predicted it wouldn’t last more than 2 or 3 years, economic realities would force it to break up. But its proven (maybe unfortunately) far more resilient than I think most expected. A key point to remember that the Euro is still very popular, even in those peripheral areas where people have suffered the most. Italians, Spanish, Portuguese and Irish remember their weak currencies and don’t miss them. They like being part of a strong currency areas and blame economic problems on other factors, not the currency (or to be precise, the design of the currency) itself. For as long as this happens, and so long as there is not another major crisis, I think the current situation will continue.

    1. paul

      Was the last great financial crisis not enough?
      The ECB seems to have its sole purpose to rescue the financial pirates from their own folly
      I would suggest intransigence over resilience.
      The literal enormity of the crushing of Greece suggests to me whatever the utopians (might have) envisaged has been gamed by their feral forebears.
      The results are in.
      Maybe there is just a certain amount of economic activity an economy can sustain.

      1. PlutoniumKun

        The ECB didn’t rescue the financial pirates (that was the job of the US Fed and the BoE), it rescued their victims – primarily gullible badly run German banks which sunk their huge surpluses of cash into the worst junk being sold both inside and outside the Eurozone.

      2. nonclassical

        ….some appear having missed just who (and why) (Goldman-Sachs) actually did Greece in:


        “Greek debt crisis: Goldman Sachs could be sued for helping hide debts when it joined euro”

        “Greece’s membership of the euro gave it access to billions of easy credit which it was then incapable of paying back, leading to its current crisis. Lenders took its euro membership as a stamp of creditworthiness, but the true state of its economy was far less healthy.

        Under Ms Loudiadis’s guidance, Goldman swapped debt issued by Greece in dollars and yen for euros which were priced at a historical exchange rate that made the debt look smaller than it actually was. The swaps reportedly made about 2 per cent of Greece’s debt disappear from its national accounts.

        The size and structure of the deal enabled the bank to charge a far bigger fee than is usual in swap transactions, and Goldman persuaded Greece not to test the transaction with competitors to ensure it was getting good value for money”

        “Goldman Sachs Shorted Greek Debt After It Arranged Those Shady Swaps”:


    2. zer0

      They knew exactly what they were doing: mass consolidation and mergers with interest free money. Little to no competition between European entities, no new businesses, no new growth. Mass immigration on uber-liberal policy only exacerbated the underlying problems. If the youth cant find jobs, how can the immigrants?

      Thank god my country of Czechia (formerly Czech Republic) is doing well – probably very much due to the fact that they control their own currency within the EU. Every year I go back to Prague, the city is humming with new businesses. Its a stark contrast to the Midwest, where the only new businesses I see are crappy restaurants.

      1. nonclassical

        …another “alternative” is, perhaps Europe is telling truth regarding stats involved, while U.S. is (as usual) lying:

        Reagan administration changed “unemployment” stats, eliminating anyone (as “new” unemployment claim) who had ever taken unemployment at any time…

        only between 2 and 3 of 5 who apply for unemployment, U.S., are granted benefit…

        anyone who has run out of benefits is not counted, U.S., unemployed…

        temp jobs, and “contract worker”, do not create auspices for collection of unemployment…

  2. Eustache De Saint Pierre

    It is a tragic tale & perhaps due to my nature I would be more pessimistic in the medium term.

    The latest from Don Quijones does not look promising for Spain, Berlusconi has taken Sicily & the Italians are it seems bucking the trend with the last poll from Pew research showing that anti- EU sentiment has risen to 39%, particularly in the South due possibly to the problems with immigration. The shenanigans in the Middle East are it appears pushing up the price of oil & who knows where all of that will end ? The ECB if it carries on tapering with the rise in oil could lead to higher inflation, which will no doubt hit those who are already victim to austerity policies. The Irish are perhaps at risk of shrapnel from the Brexit shot in the foot, although I imagine that a deal will be cobbled up between the two at least, or the Irish had better get a move on if they want to compensate for a possible loss of exports, because as we are being constantly told – trade deals take time. If it gets bad enough that the UK totally shuts the door, I imagine there is a possibility that Rosslare might be under some pressure if the ferry crossings from Dublin are compromised for the cheaper overland route through England & Wales.

    I think a recession never mind another financial crisis would put much further strain on the EU, but I am just a grumpy old man & judging by the last decade, all I see is slow decline & always I believe, we should expect the unexpected.

  3. Jim Haygood

    As the blessed Wikipedia reminds us, Eurosclerosis is a term coined by German economist Herbert Giersch in the 1970s to describe a pattern of economic stagnation in Europe that may have resulted from government over-regulation and overly generous social benefits policies.

    Remember wine lakes and butter mountains? Those were the good old days!

    Over the past decade the patient’s prognosis has worsened as euro area govt debt-to-GDP hovers just under 90 percent, with Greece (176%), Italy (135%) and Portugal (130%) way into the red zone. Is it any surprise why debt-choked Italy’s GDP grew only 0.2% compounded over 18 years?

    Debt coupled with a bloated govt sector is like combining diazepam with cannabis indica, leaving the heavy-lidded debtors mellowed out on the couch with investment, growth and activity the farthest thing from their clouded minds.

    Paris to Spain, countries in pain
    Caught up in flight, feeling the sight
    Europe dying

    — Steve Winwood, Night Train (1980)

    1. paul

      You are an engaging fellow, but you do not see the facts on the ground.
      Public sector spending in the UK is being siphoned to the paradise islands in response to the benefactors complete inability to innovate.
      And your great country leads the way.
      It’s the quality of government, not the quantity.

    2. paul

      I never done good things (I never done good things)
      I never done bad things (I never done bad things)
      I never did anything out of the blue, woh-o-oh
      Want an axe to break the ice
      Wanna come down right now

      David Bowie (1980)

      For some reason I heard the fourth line as :

      “Let the extras brave the axe”

      As he is no longer around to disagree, I’ll stick with it

    3. Hiho

      But the truth is that economic stagnation did not derive from bloated public expending and over-regulation.

      Deregulation, financialization and privatization are to blame, as they rise the cost of doing business and price workers and products out of the market.

      We have heard this neoliberal narrative far too many times to beliebe it again.

    4. nonclassical

      …”debt”, Europe, is nowhere near U.S. level..and then there’s potential for future debt already (2007 Wall Street control accounting fraud) congealed:

      “Why Is the FDIC Insuring Jamie Dimon’s Mistakes?”
      (The real problem with JPMorgan’s risky bets is that the bank is gambling with our money.)

      “JPMorgan Chase shrewdly parks virtually all of its vast derivatives holdings in its commercial bank subsidiary. In the event of a collapse, the bank can use its deposit base to pay off the derivatives, while leaving the Federal Deposit Insurance Corporation to reimburse depositors if their money runs out. This is not a trivial technicality. JPM is the world’s largest purveyor of derivatives. Its total contracts have a notional value of $72 trillion—and 99 percent of them are booked at its FDIC-insured bank. In the event of failure, sorting out the claims and counterclaims will be a costly nightmare for the FDIC. The bulk of the contracts are “plain vanilla” derivatives used as standard hedges against price or currency changes. The exotic derivatives, however, are dangerous—the kind that suddenly blew up in Dimon’s face some weeks ago, when his bank swiftly lost at least $3 billion on one complicated market gambit, with maybe more losses to come.

      We are “insuring” other big boys of banking in the same way. Citigroup has nearly all of its $53 trillion in derivatives in its FDIC-insured bank; Goldman Sachs has $44 trillion parked at an FDIC-backed institution. After Bank of America purchased Merrill Lynch, BofA began transferring the securities firm’s derivatives to the FDIC-insured bank, which now holds $47 trillion in contracts. When Senators Sherrod Brown and Carl Levin, among others, complained that regulators’ acquiescence in these transfers contradicted Congressional instructions in the 2010 Dodd-Frank reform law, the Federal Reserve, the FDIC and the Treasury Department’s Office of the Comptroller of the Currency refused to answer their objections. This matter involves “confidential supervisory” and “proprietary business information,” the three agencies responded in unison.”


  4. JLCG

    Mr Arestis does not have to look far from an explanation of his problem. The population of the Basque Country is shrinking , the population of Spain is the oldest in the world just behind the Japanese. Old people need little and they imagine less. There is a contraction of creativity both carnal and spiritual. I am an octogenarian and I feel what I put into words. Europeans have chosen sterility in order to consume at present what should have been the culture medium for the future. But these facts cannot be discussed because the whole ideological superstructure is a negation of them.

  5. TomDority

    Maybe a look at those who made off with the most loot would point out where the problems are. Those with the most have got it by gaming the system to their advantage. Might I suggest it is the oldest game in the house…the looting etc. ……could it be the Fire sector….the old feudal system ….the land
    Lords back from a little time off……the syndicate mounting up in the saddle……economists with their magical thinking and ass kisssing. The corruption of institutions….
    Like is the USA….deliberate blindness…….no one could see it coming…. just a bit of rambling on

    1. Anonymous2

      I have looked for but have yet to find a decent study on the effect of China on the EU economies. One study on Brexit concluded that the areas which voted to leave the EU were those where business had been most adversely affected by competition from China. I suspect that Italy at the least has been badly affected by Chinese competition as it’s former areas of economic strength – footwear and clothing – were among those targeted by China. Germany on the other hand benefited because it supplied a lot of high quality engineering and capital goods where China has been slower to enter the field. I don’t question that macroeconomic factors and policies have played their part but suspect that if one drills down into the details a more complex story would emerge?

      1. Eustache De Saint Pierre

        I am very familiar with one British industry that once dwarfed the German equivalent. The latter maintained the quality end & the former did not, except for a few notable exceptions who are still doing fairly well. Certain once quality British manufacturers have paid dearly for trying to do the same on the cheap & those two national industries are now roughly the same size.

        An obsession with direct labour costs while ignoring the ever growing overhead was part of it. I once inspected a large factory & it’s contents that were being sold off – the thing that stuck in my head was the numerous plush offices & the large collection of fleet cars.

      2. PlutoniumKun

        Re: Italy – there is a wonderful Italian film from 2008 called Gomorrah centring around corruption in the waste and garment trades. One thread of the story follows a tailor who is bribed/blackmailed into training Chinese machinists making haute couture in Italy – but entirely made by illegal Chinese immigrants.

        1. David

          It’s based on a book by Roberto Saviano about the Neapolitan mafia which should be compulsory reading for understanding the seamy underbelly of globalisation.

        2. Norm

          Gomorrah is a magnificent movie, but Naples did not need the Chinese to develop a viscous political/criminal/oligarchic culture. The city was quite good at that long before Marco Polo journeyed east.

  6. hman

    this is what happens when you put bureaucrats who have never had a real job in charge of things.
    they pay themselves enormous amounts, have unlimited expense accounts, have no idea what happens in a real workplace.. open borders suppressing everyones wages, ever expanding police forces that add not one iota of production..
    and people wonder why the brits voted out..
    the entire euro project is a collectivist charade engineered by germany for economic hegemony..

  7. Collins

    The political rationale for the EU is alluded to by several writers above, and it’s a mistake to discount it. The last century saw Europeans kill millions of themselves in WW2, and witnessed in the so-called enlightened 90s thousands of pale Caucasians in Eastern Europe tear each other to shreds with a tribal ferocity equal to the Hutus & Tutsis in ‘uncivilized’ Rwanda. The EU is a political path, not a business plan. It’s not going away, and in 100 years may be seen as a brilliant choice – in retrospect.

    1. Synoia

      The last century saw Europeans kill millions of themselves

      As did the century before that, and the century before, and so on back in History.

      The conventional wisdom’s solution is a large empires, under one rule, the EU or US, Holy Roman Empire, Peace and Tranquility under the Hapsburg,….. or is the “conventional wisdom” the cause?

      Those empires worked well, kept the peace, never launched wars with their neighbors….or were they the cause?

      Do bigger nations fight bigger wars? or Is the size, or deadliness, of conflict proportional to the GDP of the be belligerents?

    2. flora

      No doubt. However, the original impulse seems to have been hijacked by undemocratic neoliberal financial interests for their own gain, not for the peace of Europe.

    3. Thuto

      “Uncivilized” according to who? You? You can make a point without resorting to peddling racial stereotypes…

  8. Pookah Harvey

    Europe is stagnant due to lack of demand caused by the initial design of the single currency. , Economist Robert Mundell, who is considered the father of the Euro, was hoping to curb Democratic Socialism according to journalist Greg Palast.. From a 2012 Guardian piece

    The euro would really do its work when crises hit, Mundell explained. Removing a government’s control over currency would prevent nasty little elected officials from using Keynesian monetary and fiscal juice to pull a nation out of recession.

    “It puts monetary policy out of the reach of politicians,” he said. “[And] without fiscal policy, the only way nations can keep jobs is by the competitive reduction of rules on business.”

    He cited labor laws, environmental regulations and, of course, taxes. All would be flushed away by the euro. Democracy would not be allowed to interfere with the marketplace

    As Palast puts it:

    The idea that the euro has “failed” is dangerously naive. The euro is doing exactly what its progenitor – and the wealthy 1%-ers who adopted it – predicted and planned for it to do.

    The Paradise Papers seems to hint he is right.

    1. ChrisAtRU

      #Boom … Everyone should bookmark that article. And your comments upon resurfacing it are on point. Thank you.

    2. Synoia

      And the Brexiteer’s in the UK understand this and are willing to take the pain of regaining Sovereignty.

      Putting the amount paid to exit the European Club is a deliberate and guaranteed stumbling block on any negotiations.

      1. Pookah Harvey

        Mundell was also the father of Thatcherism and the idea of the Euro was to force Thatcherism on the continent. I like Varoufakis’ idea:

        Varoufakis attended an event in London hosted by The Guardian on 23 October 2015, where he spoke about the UK’s upcoming European Union membership referendum. He said that the UK should remain in the EU, but also campaign to democratise it: “My message is simple yet rich: those of us who disdain the democratic deficit in Brussels, those of us who detest the authoritarianism of a technocracy which is incompetent and contemptuous of democracy, those of us who are most critical of Europe have a moral duty to stay in Europe, fight for it, and democratise it.”[38] On 9 February 2016, Varoufakis launched the Democracy in Europe Movement 2025 (DiEM25) at the Volksbühne in Berlin.[39]

      2. Anonymous2

        ‘And the Brexiteer’s in the UK understand this and are willing to take the pain of regaining Sovereignty.’

        Only some of them – and therein lies part of the problem.

    3. David

      Yes, I had much the same explanation from a German central banker in 1998, with the added kicker that the Euro would make wage costs visible in comparative terms throughout Europe, and so would force workers in more prosperous countries to accept lower wages and worse conditions. The Euro is working as planned.

      1. JTFaraday

        Yes, but there’s no Euro in the US and its been very much subject to global wage arbitrage, and the Brits did retain their own currency and did impose austerity on themselves. So, whereas I can believe that some mis-designed the EU on purpose, it is not a necessary condition.

        I can’t help but think that dissolving the EU leaves all these little countries to be preyed upon, and literally destroyed, as happens in Latin America. That’s the first thing I thought of when I heard about Brexit, and I also thought that there is a local elite in Britain that would be more than happy to do it. It doesn’t matter where the Banana Republic is if you’re the local corruptible.

    4. djrichard

      “Democracy would not be allowed to interfere with the marketplace”

      Or perhaps more broadly, culture would not be allowed to interfere with the marketplace. Which reminds me of what Baudrillard was describing in his book, Simulacra and Simulation, when he speaks to liquidation of culture, in particular by media, and also by capitalism as a deterrent to anything that would interfere with the marketplace.

      I guess the way I think of it is how can culture defend itself against the media glare of not being “professional”? [How can a person defend themselves?] I think this is why the Greek’s still want to be part of the EUzone, so they can justify themselves as not being inadequate.

      Anyways, CJ Hopkins has been building on Baudrillard’s thinking, e.g. in his latest: https://consentfactory.org/2017/10/20/tomorrow-belongs-to-the-corporatocracy/. E.g.,

      “See, despite what intersectionalists will tell you, capitalism has no interest in racism, misogyny, homophobia, xenophobia, or any other despotic values (though it has no problem working with these values when they serve its broader strategic purposes). Capitalism is an economic system, which we have elevated to a social system. It only has one fundamental value, exchange value, which isn’t much of a value, at least not in terms of organizing society or maintaining any sort of human culture or reverence for the natural world it exists in. In capitalist society, everything, everyone, every object and sentient being, every concept and human emotion, is worth exactly what the market will bear … no more, no less, than its market price. There is no other measure of value.”

  9. Mel

    An article in Automatic Earth today states that the economy in the U.S. has been shrinking since the 1980s. In the 1930s, Simon Kuznets formulated the idea of the Gross National Product, and, then, he proposed ignoring the output of finance and advertising, as not constituting “product” in any way. This wasn’t done, so now, leaving finance and advertising (Google and the other PR giants as part of it) out, the GDP numbers have shown decline.

    1. P Fitzsimon

      If you mean trading in stocks, bonds,loans, insurance policies and other securities these are not included in GDP. A new house purchased from a builder is included in GDP. Purchase of an existing property is not included. However, service fees to banks, lawyers,etc are included. Those are the current rules as I understand them to be. Advertising services are included in GDP I believe

  10. MichaelSF

    the wage moderation that has characterised most euro area countries

    I suspect that many workers these days would be pleased if their wages rose to the level of “moderate”.

  11. hman

    this is an economically driven takeover of the european economic system by germany..
    they lend, they have massive savings from trade surplus’s, you borrow to buy their stuff, the money returns to them, but you owe growing interest and principal till you reach a point where you can’t pay and they tell you to starve..
    your economy/people really doesn’t need the stuff but it’s cool so you buy it..
    mucho wampum in graft on everything that moves and some that don’t..
    bullshit bookkeeping, money creation from outer space, and a few other extend and pretend sleights of hand keep the game afloat..
    if they cannot inflate away the debt on the backs of the citizenry the experiment is doomed..
    how about negative to minimal interest rates and 2% or so inflation.. Robbery..
    fiscal union may have been a good idea, but the time is past and the debt is too big..
    long live the drach, peseta, lire, escudo.. They were self correcting and things were generally good..
    some obviously see a future here where you will get the output of a german from a greek, southern italian,
    etal.. personally, i don’t see it.. most of germany is an industrial complex, very little of the southern countries is set up for that type of economic activity.. there’s a band across n. italy and very little in the south, andalusia in spain, you get the picture..
    what started out as a dinner party for 27 countries, of whom only 3 had any money, has turned into a party of 26 and the one who left was one of the ones with the money (brexit).. can’t wait till they hand the dinner check to merkel, they french can’t pay, and germany holds the debt..
    now comes the divorce extortion..

    1. Wisdom Seeker

      Re Germany / Northern European creditor nations exploiting the rest: TRUE.

      But FTA, this part is false: “The single currency is a fixed-exchange-rate system (between the member countries) par excellence without possibilities of exchange-rate adjustments to address the current-account imbalances other than internal deflation designed to reduce domestic prices. ”

      Logical fallacy – false dichotomy. There are many ways to “address current-account imbalances” besides exchange-rate adjustments and internal deflation. The imbalances could be corrected if all the nations were required to have similar economic policies, such that one nation would not produce sustained current account surpluses (as Germany has). As I understand it, German trade and taxation policy basically guarantees credit accumulation (and not by the German workers). Once credit piles up in one country, the creditors have the choice to either give it away, spend it, or lend it out. And they aren’t giving or spending it. Hence the imbalances. But what is lost, forgotten or ignored is that lending is a two-party arrangement, and the situation is as much the northern bankers’ fault (for choosing to accumulate credit, lend it instead of spend it, and make the specific loans that were made) as the borrowers’ fault.

      The flaw in the Euro design is that the creditor nations do not recognize that it would be in their own interest to reform their policies to avoid trade surpluses.

    2. nonclassical

      …those of us who have lived Germany, Europe, tell quite a different story…Germany’s problems today (refugees, and desire to do best for) are of bush-cheney making…(as HW Bush stated, “..destabilizing entire Middle-East..”) (result of removing Saddam)

  12. David

    Absolutely. I had basically the same explanation from a German central banker in 1998, with the added kicker that by making prices and wages completely visible across the Eurozone, “competitiveness” would ensure that there was a leveling down of employers’ “costs” – ie wages and conditions of work. The Euro is working as it was designed to.

  13. Collins

    The Euro and EU are long works in progress- decades. Many things to “work out” – example, retirement age in Denmark is 67, in Greece it’s closer to 59.
    The millions (that’s an ‘m’ there) of refugees and their disproportionate distribution will be of several unplanned spammers tossed into the turbine.
    My point? I’m as aware as anyone of the global crony capitalism elite; they will endeavor to prosper whether it’s UK, US, Russia, Germany, China etc. They’re a major player, but can’t predict or control everything.

    1. flora

      “several unplanned spammers tossed into the turbine.”

      Please, god, let it be so. ;)

      Apologies for sounding like a smart aleck over a typo (which I have made too many of myself.) I can only say this typo gave me the best laugh. thx.

      To the substance of your comment: I agree.

  14. Mark

    The data cited in the article is lacking in quality and scope to prove the initial point made about high unemployment and low growth.
    Nominal or even real GDP numbers are not especially useful to compare the long term development of different regions or countries.Real GDP is still blurred by population change and nominal GDP also includes inflation. Both factors reduce the numbers in the Eurozone. If GDP is used in this way it should be real GDP per capita to exclude both inflation and population change.
    If one takes a look at the average numbers for the last two or three decades for developed countries across the continents the result is quite similar, in a range of 1.0% to 1.5% p.a. Italy and Japan being the negative outliers (all IIRC). Thomas Piketty has dedicated a lot of space in his “Capital in the 21st century” book to this topic with a lot of data and some conclusions that may be drawn from it.

    National unemployment numbers are based on different criteria in each country/region and must be seen in concert with others like the labour force participation rate. Not long ago an article here on NC pointed out that the participation rate in the US has dropped in the last decade while the opposite is true in Europe. A useful comparison would be the numbers from the rest of the EU vs the Eurozone to gain an insight into the effects of the single currency. This is a quote from the Eurostat webpage:

    “The euro area seasonally-adjusted unemployment rate was 8.9 % in September 2017, down from 9.0 % in August 2017 and from 9.9 % in September 2016. The EU28 unemployment rate was 7.5 % in September 2017, stable compared to August 2017 and down from 8.4 % in September 2016.”

    So 1,5 percentage points difference, significant? Probably. Dramatic? No

    While there are many negative arguments to be made about the Eurozone, some of which have been mentioned in the comments, the article unfortunately fails in proving its point and explaining it.

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