Convergence between richest and poorest economies in eurozone is resuming. But it does so at a slow pace and income gaps are still huge. In short, euro has not served as a catalyst to reduce inequality, according to a study published yesterday by European Central Bank. Spain, in fact, has not reduced gap even though it has kept it on EU average.
It was always felt that entry into monetary union would boost growth of Mediterranean and Eastern countries by securing confidence and thus attracting investment. "It is surprising that re has been little convergence between countries that adopted euro, despite its differences in GDP per capita," says study, which does not necessarily represent ECB's opinion.Italy, without progress
"Contrary to initial expectations that establishment of Euro would act as a catalyst for faster real convergence, re has been little convergence, if any, during 1999-2016 period," he stresses. Italy recorded worst relative behavior, but even in case of Spain income gap has not diminished. The initial advances were nullified by block's debt crisis.
The study concludes that euro alone neir increases nor hinders convergence, but in case of sourn Europe it probably masked broader problems before common currency. The causes of divergence are more likely to be low productivity growth, weak institutional management, and poor investment, rar than rigidity of single currency.
Efforts to reform and recent recovery of block could stop this process, although it is too early to conclude wher changes are cyclical or more structural. Ireland and Spain, in particular, may be once again closing income gap, while many ors are at least no longer left behind. The former communist countries are also doing relatively well. Lithuania, Estonia, Latvia, Slovakia, and Romania — which does not belong to euro — have achieved greatest convergence.