Economic growth in many euro area countries is fairly closely aligned, while unemployment figures tend to vary more, according to the latest calculations by the EconPol Europe research network. Based on closely aligned developments across EU states between 1999 and 2014, the authors from the Munich-based ifo Institute and Brussels-based Centre for European Policy Studies conclude that state transfers aimed at stabilising Europe’s economy across national borders would only have a very limited impact. For shocks impacting the Eurozone as a whole, such a system could even trigger effects that exacerbate the crisis. “The deeper integration of capital markets would be a more effective way of helping the system to cope with economic shocks,” said ifo President Clemens Fuest, one of the co-authors of the paper.
The co-authored paper was published to mark the founding conference of the EconPol research network in Brussels. Since the launch of the euro, the paper reveals that economic developments have been closely aligned in Germany, Austria, Belgium, The Netherlands, Luxemburg, France and Italy. These countries are followed by Slovenia, Spain, Estonia and Portugal. Economic developments show greater divergence in Ireland, Latvia and Lithuania. Greece was the only country with a completely different economic cycle to that of the other euro area countries between 1990 and 2014.
EconPol Europe’s members are the ifo Institute, the Centre for European Policy Studies (ZEW) in Mannheim, the Institute for Advanced Studies (IHS) in Vienna , the Centre for European Policy Studies (CEPS) in Brussels, the Centre d’Études Prospectives et d’Informations Internationales (CEPII) in Paris, the Toulouse School of Economics, the Oxford University Centre for Business Taxation, the Department for Economics and Management at the University of Trento and the VATT Institute for Economic Research in Helsinki.
EconPol Europe is financed by the German Federal Ministry of Finance.