20 Years of the Euro: Are Netherlands and Germany the Only Winners?
Zsófia Nagy-Vargha 2019.08.01.
20 years after the euro’s introduction, its effect is still a much disputed subject. The Freiburg research center (CEP) has used a synthetic control method to analyze which countries have gained the most from the introduction of the currency and which ones have lost out. The study shows it was Germany which gained by far the most from the introduction of the euro: almost 1.9 trillion euros from 1999 to 2017. While the biggest losers are undoubtedly Greece and Italy.
“What would be the per-capita GDP of a particular euro state if it did not introduce the euro?” – That is the question asked by the research center at the beginning of the year, at the twentieth anniversary of the currency’s introduction.
The study reminds us that the euro suffered its first crisis in 2009. At the height of this, in mid-2012, five out of the – at the time – 17 eurozone countries (Greece, Ireland, Spain, Portugal and Cyprus) needed financial help. The situation did not mitigate until the President of the European Central Bank (ECB), Mario Draghi, promised that the ECB would do everything possible to save the monetary union.
According to the analysis, the problem with the currency is that euro states can no longer devalue their money in order to remain internationally competitive. Before the introduction of the euro, this was a common practice among the states. In the decades prior to the introduction of the euro, they remained competitive by greatly devaluing their currencies. Now they can not do this anymore and are instead forced to carry out structural reforms with high social and economic growth cost.
What do the numbers say? The study shows:
“Germany has gained the most from the introduction of the euro by far: almost 1.9 trillion euros from 1999 to 2017. This amounts to around 23,000 euros per inhabitant. Otherwise, only the Netherlands and Greece in their early years have gained substantial benefits from it. In all the other countries analyzed, the introduction of the euro has led to wealth losses: in France 3.6 trillion euros, in Italy even 4.3 trillion euros. This means 56,000 euros per inhabitant in France while 74,000 euros in Italy. “
Table 1 shows, for each of the eurozone countries studied, how much higher or lower its GDP would have been in 2017 per capita (column 2) and in total (column 3) if it had not introduced the euro.
The analysis focuses on countries where enough time has passed since the introduction of the common currency. It features eleven Member States including the seven countries that founded the Eurozone in 1999 (Germany, the Netherlands, Belgium, France, Spain, Italy, Portugal) and Greece, which joined two years later. A more detailed country profile shows that, with the exception of 2004 and 2005, Germany benefits from the Euro-EU leadership every year, especially since the euro crisis.
Although Greece and Italy top the list of those that lost the most on the euro’s introduction, France has also suffered disadvantages.
In both latter countries, the euro has led to declining wealth: in France, 3.6 trillion euros, in Italy even 4.3 trillion euros. This amounts to 56,000 euros per capita in France and 74,000 in Italy.
Two-thirds of Hungarians would welcome the introduction of the euro
Recent surveys on a possible introduction of the euro show an intriguing picture: the majority of people in non-eurozone countries would welcome the introduction of the European currency, confirms a Eurobarometer survey recently published in Brussels.
According to the report, respondents’ support for the single currency was 66% in Hungary, the highest in the monitored seven countries. On average, 55% of the surveyed population would support an immediate and 42% an early adoption of the euro, the report says. 56% of respondents in the seven countries thought that the single currency had a good impact on the economies that had already joined the currency union. The survey was conducted in Bulgaria, Croatia, the Czech Republic, Hungary, Poland, Romania and Sweden.
The possible introduction of the European currency in Hungary, however, is not on the table right now, there is no target date set.