A macro-development perspective on euro area imbalances

By FEPS and Initiative for Policy Dialogue (IPD), founded by Nobel Laureate Joseph E. Stiglitz.

Policy Study

12/05/2022

This policy study by Juan Montecino provides a macro-development perspective on the euro area imbalances. Drawing on insights from development economics, the author provides an overview of the link between external competitiveness, current account imbalances and an economy’s long-term productivity growth.

The study argues that recent macroeconomic trends in the Euro Area suggest that Germany’s current account surpluses are responsible for a ‘Dutch disease’-style de-industrialisation in periphery economies. There are also tentative signs that the loss of competitiveness may leave lasting scars on these economies’ levels of productivity.

The study concludes with some tentative policy recommendations to help address these structural imbalances. On the core country level, these include adopting an expansionary fiscal stance and pursuing wage growth. On the European level, re-engineering industrial policy and the use of targeted subsidies could re-align the real effective exchange rates of core and periphery countries and contribute to solving the problem.

This research is part of a cooperation between FEPS and the Initiative for Policy Dialogue (IPD), based at Columbia University, founded by Nobel Laureate Joseph E. Stiglitz.

Network
Initiative for Policy Dialogue
Find all related publications
Publications
04/10/2022

Europe’s social integration

Welfare models and economic transformations
06/07/2022

Countering economic coercion

European Strategic Autonomy series - Economy & Trade
06/07/2022

Leveraging trade policy for the EU’s strategic autonomy

European Strategic Autonomy series - Economy & Trade
13/06/2022

A new EU strategy for rural areas

Just Transition & Revitalisation
Find all related events
Events
Upcoming
15/12/2022
Rome, Italy

National Recovery & Resilience Plans: Assessing to improve

Recovery Watch series
Past
03 - 04/11/2022
Vilnius, Lithuania

Tackling the rise of living costs

Towards a progressive approach from the Baltics. Vilnius Conference
07/09/2022
FEPS Headquarters, Brussels

A Young and Fresh look at the EU Fiscal Future

An economic governance for future generation
Find all related news
News
18/10/2022

Open letter to call for a deep reform of the EU fiscal rules

FEPS cosigned an open letter to EU leaders calling for them to address the underlying structural […]
30/05/2022

FEPS launches ‘Recovery Watch’, a new research project

The National Recovery and Resilience Plans represent the new framework in which member states will identify their […]
10/05/2022

Call to participants: Training Days for Social Business

Switzerland, September 3rd 2022
28/04/2022

Prof. Stiglitz: NextGenEU was a step forward, but the EU needs more flexibility

The Nobel Laureate in Economics Prof. Joseph E. Stiglitz speak out about EU’s economic governance and fiscal rules […]
Find all related in the media
In the media

Sulle riforme del pnrr sull’inclusione serve partecipazione dei territori

by ANSA 06/10/2022
Interview with FEPS Director of Studies and Policy David Rinaldi

‘Wave of poverty’ expected to hit Brussels in winter, says social welfare expert

by Euronews 08/09/2022

Ronald Reagan és a “Reaganomics” legendája – Beszélgetés Andor Lászlóval

by Tilos Rádió 03/09/2022
FEPS Secretary General László Andor participates on 'Régen minden jobb volt' (Everything used to be better) backward-looking history programme on HU 'Tilos Rádió' on Ronald Reagan.

Tyskland vill slopa vetorätt inom EU

by ETC 29/07/2022