Economic Convergence and Divergence in Europe

Trade liberalisation, free movement of capital, as well as labour mobility promote economic growth and convergence between both states and regions. This neoclassical theoretical approach is the most important economic cornerstone of European unity. Economic integration is accordingly not only for affluent, but also for poorer member states and/or regions. This theory, however, is based on restrictive assumptions and is therefore widely criticised. Another approach points to the impact of the effects of agglomeration and scale, which oppose this convergence thesis. In empirical terms both development trends can be observed. Within the European Union member states economically drew closer over the years and subsequently diverged again after the financial and debt crisis. Is the European Union integrating more closely economically, socially and ultimately politically; or is it drifting apart? What are the factors driving the respective development trends? These were the issues examined at a scientific conference held on 8th to 10th July at the Akademie für Politische Bildung Tutzing under the supervision of Wolfgang Quaisser. Some of the speeches given at the conference are documented in this article. According to Michael Grömling, Institut der deutschen Wirtschaft Köln, German current account surpluses are no reason for sanctions. The high German current account surpluses over the past ten years are the result of an asymmetrical shock and the country's specific economic structure. Germany did not enjoy growth at the expense of other EMU countries, nor did it trigger any problems or create adjustment burdens in the EMU as a result. Hartmut Bechtold, True Sale International GmbH, Frankfurt am Main, and Markus Demary, Institut der deutschen Wirtschaft Köln, argue that capital market integration in Europe can be improved via the securitisation market. The requisite geographical diversification of credit risk can only be achieved via securitisation, which is the European model for capital market integration. Michael Dauderstädt, formerly of the Friedrich-Ebert-Stiftung, Bonn, discusses the degree of convergence between rich and poor EU states and highlights that divergence has dominated in the Eurozone since 1999 at the very least. Heinz-Jürgen Axt, University of Duisburg-Essen and guest professor at the University of Saarland, shows that structural policy has only partially succeeded in promoting growth and competitiveness, despite the use of significant funding to this end, and proposes a far-reaching concentration on growth centres.