Coppola is right. The Euro did lead to DIVERGENCE between EU countries

Real-World Economics Review Blog

The as usual excellent Frances Coppola tells us, in an op-ed titled ‘The ECB is irrelevant and the Euro is a failure‘, that the Euro did not lead to economic convergence but to economic divergence (‘DIVERGENCE’, to quote Coppola). She rightly mentions the extreme and still increasing differences in unemployment rates. Unemployment rates however only started to diverge after 2008. Before 2008, rates converged. Other variables however already diverged clearly before 2008. The ‘net international investment position’ of EU countries is a case in point. This is, roughly speaking, the value of international assets owned by the inhabitants of a country minus their international debts (a precise definition at the end of this post). It is among other factors influenced by the price of the assets (for instance: stocks) as well as the increase in debt/assets connected with current account deficits/surpluses. The graphs show that:

A. Differences are…

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