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Divergent Europe: Coming apart at the seams

Brian Sturgess - May 2013

Speed Read
  • The economic performance of Germany and France, Italy and Spain has diverged since the financial crisis of 2008.
  • Stronger German growth is reflected in GDP numbers, relative unemployment rates, large differences in the cost of credit and in consumer confidence.
  • The economic division within the Eurozone is widened by trade and government account surpluses in Germany and deficits in France, Spain and Italy.
  • These economic imbalances cannot be resolved automatically within the constraint of a single currency without central control over fiscal deficits or a convergence of GDP growth rates.

Germany uncouples from its partners

One issue that needs to be addressed within the Eurozone is the growing economic imbalances in GDP growth between the main member countries. The process of economic convergence of the four main economies driving the Eurozone has weakened significantly in the aftermath of the financial crisis of 2008.  These countries accounted for 77% of Eurozone GDP in 2012.

The data in Chart 1 shows that the German economy recovered far mor...

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