Fundamentally, they are political. Technical proposals for rendering the eurozone robust have been tabled time and again: a eurozone investment budget, a European deposit-insurance scheme, a proper eurozone unemployment-(re)insurance system, the issuance of joint- and several-liability eurobonds. And, time and time again, these have been discussed, diluted and typically disposed of in a drawer.
The truth is there is insufficient trust to move forward. Resilience requires risk-sharing; risk-sharing requires trust. Trust, however, has been eroded by disappointment—disappointment that a decade of austerity has failed to reduce debt, disappointment that two decades of the euro have failed to bring convergence. [...]
This promise has not been fulfilled. On the contrary, the eurozone has been drifting apart—since long before the current crisis. While in 1999, GDP per capita in northern Europe was around €2,000 above the eurozone average, by 2019 it was €4,500 higher. Conversely, Italy and other southern-European countries have lost ground, from about €4,000 below the eurozone average in 1999 to €7,500 below 20 years later. Instead of shrinking, the gap has doubled. [...]
A more promising approach is to even out the regional distribution of value added. Andalusia, the Uckermark and metropolitan areas such as Naples or Thessaloniki should be brought to similar levels of productivity as Munich, Milan or the Amsterdam metropolitan area.
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