Summer 2015, at least on the financial front, will undoubtedly be remembered as that of Greek crisis. The frantic weeks between June and July marked a fundamental step in the history of Greece and Europe. Although the aid disbursed on 17 July has now temporarily reduced tensions on the markets and have given new life to an economy on the verge of collapse, they have certainly not resolved the structural problems of the Old Continent. indeed, theevolution of the Athens crisis if anything, it put in great evidence how it is now impossible to continue with a system like the current one, which provides for a monetary union but not a political, economic and fiscal union.
The difficult path to one greater integration between the various countries of the Eurozone has as its main obstacle the differences between the various economies of the area. Analyzing them in detail is therefore important to better decipher the current situation in Europe. The table in the image above on the left therefore shows the main macroeconomic data relating to the economies of the Eurozone. More than analyzing the single figures, in this phase we are particularly interested in observing how much for each parameter the data differ from country to country.
We can start from the analysis of the public accounts, at least theoretically bound to the Maastricht parameters approved by all the governments of the area. Greece aside, we note that the level of the debt/GDP ratio fluctuates between 10% in small Estonia and 132% in Italy, and that the debt of the Mediterranean countries, as known, is much higher than that of the Northern countries. Faced with these differences and the worsening of the debt crisis (2011-2012), for years the continental authorities have required the countries in greater difficulty to comply with the European rules in terms of public finance, in order to favor the return of the debt debt/GDP of peripheral countries.
Despite this, however, in 2014, eight euro area countries recorded deficits higher than foreseen in the agreements (3%); and for the current year still four of them will have a significant deficit. Thus, while Germany is about to end 2015 with a budget surplus, Spain will have a deficit of 4,5%. Going beyond the numbers, this means that in the face of the crisis some countries have adopted restrictive budgetary policies favoring strict public finances (often even to the detriment of growth), while others have preferred to generate new deficits to accelerate recovery.
It is also for these reasons that the differences are great if one looks at theGDP trend. While the Eurozone grew by 0,8% in 2014 and is set to grow by 1,5% this year, within it there are countries such as Ireland and Spain (where the growth rate is order of 3-4%) and opposite situations such as the Italian one, with a recession in 2014 and still low growth in the current year.
As for the job market, the discrepancies are more significant than ever: the share of unemployed fluctuates between 5% in Germany (reflecting an economy close to full employment) and 24,5% in Spain, symbol of an economy still in great difficulty. Finally, we also have big differences on the price front, with some countries experiencing deflation in 2014 and others like Austria with inflation already close to the ECB's 2% target.
In short, beyond Greece, the situations of imbalance within the Old Continent are truly numerous; and the level of GDP per capita highlights even more how different the degree of development of the various countries is. Having reached this point, however, it should be noted that differences within a union between states are inevitable: in the USA itself, the per capita GDP of Delaware is double that of Mississippi, unemployment in Nebraska is a third to that of West Virginia, and growth rates vary significantly from state to state.
However, overseas, a fiscal union coordinated by a strong central government guarantees a redistribution of public resources at the federal level, while a flexible and integrated labor market favors the reduction of imbalances. The goal therefore cannot be to cancel out the differences. However, if the European Union wants to continue to exist in the long term, it will necessarily have to question itself in the short term to decide whether the presence of a strong continental government will manage future imbalances, or whether it will be the dynamics of the currency markets.
To realize the first scenario, given the current context, a strong political will, mutual trust between governments, the ability to make rapid decisions and great foresight are needed. In the second scenario, however, the Euro project and perhaps the European Union project itself could be considered concluded. In any case, in the months and years to come, the theme will occupy the front pages of the newspapers and influence the trend of the markets.
