Euro – Unfit for Diverging Economies

This is a syndicated repost courtesy of True Economics. To view original, click here. Reposted with permission.

An interesting chart from Bloomberg on intra-EU productivity divisions:

The key here is not the current spot observation or the trend forecast forward, but the dynamics from 2008 on. Since the GFC, productivity divergence within the EU has been literally dramatic. And the two interesting markers here are:

  1. Divergence in productivity between the ‘North’ and the ‘South’ – highlighted in the Bloomberg note, but also
  2. Divergence in productivity between Germany and France

In simple terms, until about 2010, the Euro monetary union was not quite working for the ‘South’ while it did work for the ‘North’. However, since 2010-2012, the divergence between the ‘North’ and the ‘South’ has spread to France vs Germany divide as well. The Euro, it appears, is not quite working for France either.

A more involved view of the continued divergence in the Euro area is here:

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