Getting Closer or Falling Apart? Euro Countries After the Euro Crisis

43 Pages Posted: 29 Jun 2021 Last revised: 29 Jul 2021

See all articles by Massimo Bordignon

Massimo Bordignon

Universita Cattolica; CESifo (Center for Economic Studies and Ifo Institute)

Nicolò Gatti

University of Lugano - Faculty of Economics

Massimiliano Gaetano Onorato

University of Bologna - Department of Economics

Date Written: July 2021

Abstract

We study convergence and divergence dynamics in a sample of EMU countries by assembling an extensive dataset that contains information on public spending and policy outcomes in a variety of areas of government intervention including education, health, and civil justice from the early 1990s. We also focus on other important determinants of a country’s economic performance such as the level of regulation of product and labor markets, as well as the trust in political institutions, quality of governance and inequality. Results show that despite divergent economic growth in the Euro periphery countries after the 2011-13 Euro crisis, the quality of services and level of regulation did not deteriorate or indeed improved, increasing convergence with the core Euro countries. However, the debt crisis dramatically worsened citizens’ perceptions of quality of governance as well as the level of social trust. The very different approach followed with the COVID crisis might have mitigated the problem, but the Euro project has still shaky foundations. This calls in question its future political viability and asks for reform.

Keywords: Euro, debt, crisis, convergence, reforms, governance, trust

JEL Classification: H5, G01, P48, P51

Suggested Citation

Bordignon, Massimo and Gatti, Nicolò and Onorato, Massimiliano Gaetano, Getting Closer or Falling Apart? Euro Countries After the Euro Crisis (July 2021). Available at SSRN: https://ssrn.com/abstract=3868813 or http://dx.doi.org/10.2139/ssrn.3868813

Massimo Bordignon

Universita Cattolica ( email )

20123 Milano
Italy
+39-2-5836-3300/1 (Phone)
+39-2-5836-3302 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Nicolò Gatti

University of Lugano - Faculty of Economics ( email )

Via Giuseppe Buffi 13
CH-6900 Lugano, CH-6904
Switzerland

Massimiliano Gaetano Onorato (Contact Author)

University of Bologna - Department of Economics ( email )

Bologna
Italy

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