Pandemic pushes polarisation: the Corona crisis and macroeconomic divergence in the Eurozone

Abstract

This paper discusses the uneven consequences of the macroeconomic fallout from the Coronavirus and related economic policy responses against the background of an analysis of longer-term macroeconomic divergence in the Eurozone. We show that the macroeconomic impact of the Corona crisis is estimated to be more severe in Southern Eurozone countries than in Northern Eurozone countries, which further reinforces the tendency of an increasing economic polarisation. This polarisation process can be traced back to existing differences in production structures and uneven vulnerabilities of the underlying growth models. As a consequence, any policy response to the Corona crisis that does not take the deeper problems of structural polarisation into account will suffer from limited impact in the medium to long run.

Has COVID-19 pandemic crisis changed the EU convergence patterns?

“…Odendalh and Springerford (2020) proved significant divergence in the public debt, emphasizing the fact that the Southern Member States were especially hit by the crisis because their higher debt levels would hamper the recovery, so their governments had problems to finance the increased costs caused by the COVID-19 pandemic. These differences can also be explained by the results obtained by Gr€ abner et al (2020aGr€ abner et al ( , 2020b, who emphasized the fact that the Southern EMU members had followed the debt-led growth model, which resulted in the accumulation of the public debt in those countries. In the real convergence field, the first considered indicator is the current-account balance, which is a very important indicator, especially so during the crisis.…”

International Inequality and the COVID-19 Pandemic

“…However, the eastern periphery performed well (with the exception of Croatia and Hungary), while relatively rich countries such as the UK, Italy or France experienced massive drops. The EU's southern periphery (Cyprus, Greece, Italy, Portugal and Spain) suffered most, thus aggravating already existing problems resulting from the Great Recession of 2009, the subsequent sovereign debt panic and the ill-designed austerity policies (Gräbner et al, 2020). The pandemic reinforced the previous regional pattern of catch-up growth in the EU (Dauderstädt, 2021b).…”

What do we know about business and economics research during COVID-19: a bibliometric review

“…The first sub-stream of the literature is related to the COVID-19 impact on the macroeconomic and microeconomic levels. The literature addressed several economic challenges raised due to the COVID-19, which summed to the collapse of trade, an increase of unemployment rates and the contraction of the economic cycle (Gill, 2020;Gr€ abner et al, 2020;Ng, 2020;Welfens, 2020;Yotzov et al, 2020). Despite the hardness of measuring macroeconomic uncertainty in the initial stage of the current pandemic, many governments started their intervention during the emergence of the crisis through controlling and monitoring the fiscal and monetary policy (Chakraborty & Thomas, 2020;Sarkodie & Owusu, 2021) while other researchers investigated the labour market and poverty rates (Deaton & Deaton, 2020;Ker, 2020;Lawley, 2020;Suryahadi et al, 2020).…”