PARIS – Some economists believe that this summer could mark the moment when some of the eurozone’s peripheral members may begin to be forced out; others think that such a scenario is inconceivable. All agree that, at least in the short term, a eurozone breakup would be disastrous for jobs and growth.
But, because the outcome is unknowable, and depends on politics as much as on economics, let us leave that frightening prospect to one side and look instead at what we know about the underlying performance of the European Union economy. In short, how competitive is Europe in the summer of 2012?
If we compare the EU-15 (the membership before the enlargements of 2004 and 2007) with the US, the most obvious point is that GDP per capita in Europe is almost 25% lower, a difference of around $11,000 a year. Furthermore, per capita EU productivity, which had been converging on the US level for 20 years up to 1995, when Europe was only about 5% below the US, lost ten percentage points in relative terms in the decade preceding the eurozone crisis. Europe was unable to match America’s significant productivity boost from the information-technology revolution.
But Europe managed to hold its share of global exports during that period more effectively than did the US. European companies have been more successful, on average, at maintaining their share of emerging-market demand than have US companies.