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Current Forum: The 8th annual Intereconomics/CEPS Conference in Brussels

Economic Convergence or Divergence in the EU?

The financial crisis of 2008 left many EU Member States struggling to overcome the lingering effects on their economies. How is the process of economic convergence going in the EU ten years later? On our 8th annual conference a distinguished group of economists, researchers and representatives from EU institutions examined this question looking at different parts of the EU, the impact of institutions and policy measures, alternative approaches such as the 'convergence of opportunities for people and firms' and the specific regional factors at play.

Cinzia Alcidi opens this issue with a look at trends in income convergence patterns in the EU. She finds that deeper economic integration does not necessarily lead to income convergence - in fact, full income convergence is not a realistic objective. Cristobal Ridao-Cano and Christian Bodewig suggest the EU should upgrade its 'convergence machine'. Using the 'equality of opportunity' principle, the authors argue that policies should focus on leveling opportunities and compensating for inequalities for both firms and people.

Regional factors may help provide insight into patterns that promote or hinder convergence. László Andor calls out the lack of social convergence in the convergence process in East-Central Europe that may undermine the continuation of strong economic performance in the future. The EU should pay attention to the East-West imbalances and consider strategies to address them. Giuseppe Celi, Dario Guarascio and Annamaria Simonazzi examine the roots of the EMU crisis and the impact of the response to it. They call for something like a 'Marshall Plan for Europe' that would help to coordinate efforts.

Barry Eichengreen looks at the Italian example and finds both convergence and divergence. The reason for this, so Eichengreen, is the mismatch between the country's inherited institutions and the requirements of new technology. Michael C. Burda also examines one country but focuses on different regions - the convergence of the new and old German 'Bundesländer'. Burda finds that while incomes per capita and standards of living have converged, value added per capita has not and shows little sign of doing so soon. And finally, while Charles Wyplosz looks at macroeconomic imbalances and cautions about Europe scapegoating itself, Mathias Dolls, Clemens Fuest, Carla Krolage, Florian Neumeier and Daniel Stöhlker propose strengthening national responsibility for the convergence process by giving Member States the possibility to propose a convergence roadmap in the context of the European Semester.

Figure of the Month

In-country income divergence: selected countries

This figure from Cinzia Alcidi’s article "Economic Integration and Income Convergence in the EU" from our current issue shows the In-country income divergence in selected east-european countries.

Editorial

Macron Struggles to Reunite a Divided Country

The yellow vest movement began at the end of 2018 as a protest against rising fuel taxes and quickyl morphed into a broader movement that has draw French citizens from all walks of life with a range of complaints. While the Macron government initially ignored what it perhaps gauged as a fleeting disturbance, it sat up and took notice when the protests became more vehement and widespread. Macron now finds himself at a crucial moment, writes Julie Hamann, who explains how Macron went from being the social and economic reformer to being seen as the 'president of the rich.'

Quote of the Month

US Cities Are Stepping Up and Stepping In to Prevent Climate Disaster

"When most people think about the pollution that causes climate change, they think of power plants or congested streets and highways. But in New York City, nearly three-quarters of our emissions come from buildings. While these buildings might be best known for creating an iconic skyline, their impact on air quality and climate is akin to that of factory smokestacks."

From our current Letter from America article Cities Are Stepping Up to Prevent Climate Disaster by Mark Chambers, Director of the NYC Mayor's Office of Sustainability

Forum

Convergence roadmaps

"Giving the European Commission additional competences in areas where national economic policies generate considerable spillovers can be helpful, but may blur responsibilities and allow national politicians to blame ‘Europe’ for unsatisfying results, even if these results are primarily caused by shortcomings of national policies and the failure to implement necessary reforms," write Mathias Doll et al. Rather than scapegoating, the use of 'convergence roadmaps' would help Member States acheive targets by setting out specific time horizons and indicators.