Cohesive Growth in Europe: A Tale of Two Peripheries

Area of Science:

• Economics
• European Union Studies
• Regional Economic Development

Background:

• Income disparities among European Union (EU) member states generally decreased over the past two decades.
• This trend was particularly evident before the 2009 financial crisis.
• While Central and Eastern European countries experienced economic convergence, Southern European nations began to diverge after 2009.

Purpose of the Study:

• To analyze the trends in income disparities within the EU over the last twenty years.
• To identify the factors contributing to the economic catch-up of Central and Eastern Europe and the divergence of Southern Europe.
• To propose policy recommendations for sustainable future growth in EU member states.

Main Methods:

• Analysis of economic data on income disparities across EU member states.
• Examination of nominal convergence (real appreciation) and foreign capital flows as drivers of growth.
• Comparative analysis of economic performance in different EU regions.

Main Results:

• A general decline in income disparities across the EU occurred, especially pre-financial crisis.
• Central and Eastern Europe showed significant catch-up growth, aligning with the EU average.
• Southern Europe experienced a decline in economic standing relative to the EU average after 2009.
• Catch-up growth in peripheral regions was facilitated by nominal convergence and foreign capital.

Conclusions:

• Future EU economic growth requires policies that prioritize domestic demand.
• Stabilizing capital markets is crucial for sustained economic development.
• Investment in research, education, healthcare, and intangible assets is essential for long-term prosperity and reducing disparities.