The Euro and growth

Traduction établie par Anne-Marie de Grazia.
The euro-crisis has brought to the fore the fact that the single currency has had a depressive rather than an expansionist effect on the economy. This fact is sometimes challenged in view of the results of the last three years. However, it is appropriate to look at the situation over a longer period, taking into account the so-called “pre-euro” situation in which the countries which were bound to build the future Eurozone implemented budgetary adjustment policies which already had recessive effects. One needs to go back to the middle of the 1980s in order to get a truly retrospective outlook on the impact of the Euro, staking out a period sufficiently long for the project of an Economic and Monetary Union to have no influence.

Chart 1

Average rate of growth by period

1986/2012 1986/1999 2000/2007
Canada 2,48 2,75 2,84
France 1,81 2,30 2,06
Allemagne 1,86 2,36 1,67
Italie 1,24 2,00 1,56
Japon 1,70 2,44 1,52
Grande-Bretagne 2,45 3,07 3,16
Etats-Unis 2,59 3,30 2,59
Suède 2,31 2,21 3,23

Source: FMI, Outlook Database, April 2013

We observe then that the three main economies of the Eurozone (Germany, France and Italy) have had much lower growth rates over the period 2000-2007, at the time of the Euro, than from 1986 to 1999. Significantly, if one looks at the two main economies of the European Union which are not part of the Eurozone, Great-Britain and Sweden, one can see that their growth tends to accelerate at the moment of the introduction of the Euro. This can be verified on a chart retracing growth since 1986.

Graph 1


This chart shows that, excluding Japan (which finds itself in the so-called “lost decade” following the burst of the real-estate bubble), the results of the countries outside the Eurozone are very widely superior to those of the countries within the Eurozone. Great-Britain is, for its part, penalised beginning with the 2007-2008 crisis by the financiarization of its economy. This can be put in evidence if one adjusts the focus so as to consider ONLY the period of the setting up of the Euro.

Graph 2


Source: idem Chart 1.

The financial crisis is having a long-lasting impact on Great-Britain. But this is by no means due to the fact that the country is not part of the Eurozone. If one looks at Sweden, one notes that the profile of this latter country is identical to the profile of Great Britain from 2006 to 2009, but that after 2009 growth restarts very strongly. The difficulties of Great-Britain since 2010 are therefore linked to its growth model, which is largely based on financial services. Let’s take notice of the fact that its results remain superior to those of the three countries of the Eurozone over the whole period. From this point of view, the comparison with Italy is striking. While this country was about to catch up with Great-Britain at the end of the 1980s, the gap suddenly widened in the 1990s and 2000s. In fact, Italy appears as one of the countries which have been most penalised by the existence of the Eurozone.

A simple analysis of the growth statistics shows well that the introduction of the Euro went hand in hand with a sharp braking of growth for the economies of the Economic and Monetary Union. This slow-down, which is evident when one looks at the United States, is just as spectacular for the two main economies of the EU which are not members of the Eurozone, Great-Britain and Sweden. Far from having contributed to the reinforcement of Europe, the Economic and Monetary Union has in reality contributed to its weakening on the international scale, and this even BEFORE the euro-crisis took its present dimensions. This crisis threatens henceforth to turn into a catastrophe with the unprecedented impoverishment of countries such as Greece (27% of unemployed), Spain (25%) and Portugal. This is confirmed by the declaration of Lars Seier Christensen, Vice-President and co-founder of Saxo-Bank at the occasion of a conference in London:

“… let us turn to the situation in the Eurozone

Frankly, it is a complete mess. And it is a mess that gets worse and worse every day. Only not in Brussels. There we hear an endless litany of promises of recovery in six months time, always in six months time, we hear the Euro is safe, and that if just we all hand over more responsibility to our Masters in Brussels, everything will be just fine.

Nothing could be further from the truth. We have just been through the bailout of the fifth Euro zone country, and both Slovenia and Malta are queuing up to be next. When, not IMF, the Troika arrive in these two countries, it will create an absurd situation where nearly half of the Eurozone countries have been broken by their adoption of the common currency, the same EURO they joined with such high hopes for the future.” (source)

It matters now to draw the conclusions.

Jacques Sapir

Ses travaux de chercheur se sont orientés dans trois dimensions, l’étude de l’économie russe et de la transition, l’analyse des crises financières et des recherches théoriques sur les institutions économiques et les interactions entre les comportements individuels. Il a poursuivi ses recherches à partir de 2000 sur les interactions entre les régimes de change, la structuration des systèmes financiers et les instabilités macroéconomiques. Depuis 2007 il s'est impliqué dans l’analyse de la crise financière actuelle, et en particulier dans la crise de la zone Euro.

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