The Eurozone’s Hidden Strength
BRUSSELS – For years, the eurozone has been perceived as a disaster area, with discussions of the monetary union’s future often centered on a possible breakup. When the British voted to leave the European Union last year, they were driven partly by the perception of the eurozone as a dysfunctional – and perhaps unsalvageable – project. Yet, lately, the eurozone has become the darling of financial markets – and for good reason.
The discovery of the eurozone’s latent strength was long overdue. Indeed, the eurozone has been recovering from the crisis of 2011-2012 for several years. On a per capita basis, its economic growth now outpaces that of the United States. The unemployment rate is also declining – more slowly than in the US, to be sure, but that partly reflects a divergence in labor-force participation trends.
Whereas labor-force participation in the eurozone is on the rise, it has been declining in the US since around 2000. The departure of Americans from the job market reflects what economists call the “discouraged worker” phenomenon. And, indeed, the trend has accelerated since the recession of 2009.