Global Imbalances and EU Core-Periphery Division: Institutional Framework and Theoretical Interpretations

Abstract

This article places the core-periphery division in the European Union (EU) within the framework of global imbalances and the dramatic geopolitical changes which have affected them in the past decades. These changes, which have been shaping the new world order, amount to the restructuring of developed economies with the engulfing of manufacturing by the financial sector; the shift in the geography of industrial activity resulting from the increased outsourcing and offshoring of production and increasing services; the transfer of competitiveness from West to East, to dynamic Asian economies, notably China; the emergence of chronic trade and financial imbalances in the global system, leading to the “debt-fuelled growth” of many advanced economies. The above developments, facilitated by free trade market reforms and enhanced by the financial crisis of 2008, threaten economic and political dominance of the West, particularly the US, and therefore the existing core-periphery pattern. A similar pattern of developments has been taking place within Europe (through the transfer of industrial production from the West to the East) which implies changes to the old European core-periphery pattern. The article approaches critically and qualitatively the above issues, by examining the convergence trends among EU member states and the possible factors underlying them, as well as a number of theoretical approaches that interpret spatial inequalities and core-periphery patterns.