Economic Development and Performance of Eurozone Economies: The Growing Imbalances During the Crisis

Abstract

The recent global financial crisis in Europe is defined as a debt crisis and a crisis of sudden stops in capital flows. But to a large extent, it was also a competitiveness crisis, which separated the core and the periphery Eurozone countries. The main issue under consideration in this paper is whether the crisis has exacerbated economic performance and imbalances. The data used in the analysis refer to the Eurozone countries, for the period from 2000 up to the last recessionary year for Eurozone (2013), which is divided into the period before and the period after the outbreak of the crisis. To test this hypothesis, an Index of Economic Performance is calculated based on the stability and growth of five indicators that determine the level of competitiveness. The main conclusions of the analysis are as follows: Countries that increase production, improve productivity, maintain or increase employment levels, reduce hourly wages, and reduce working hours instead of laying off people and increase their share of exports are considered the most successful. There is a widening of imbalances in the Eurozone, especially after the outbreak of the financial crisis, highlighting the reasons why some economies have been hit more or less by the recent global financial crisis, affecting in that way their economic development process. The management of the crisis has failed to reduce these imbalances, with the result that the European South and the European North of the Eurozone are diverging, delaying the process of European integration.