The euro project was supposed to seal the common economic destiny of “core” Europe. Rather than bringing countries closer together, however, the opposite has happened. Since the introduction of the euro, we have witnessed a divergent evolution of eurozone economies – caricatured as the contrast between a virtuous North, which has kept its public finances in check and become more competitive through reforms, versus a “profligate” South, with rising debt and continuously weakening competitiveness.

This divergent evolution is also reflected in figures that act as a proxy for the evolution in living standards: while per-capita GDP has increased since 2000 for the eurozone as a whole (even more so for the entire EU-28), this has not been uniform. Broadly speaking, countries in the North have fared much better than those in the South, as have the new EU entrants after 2013, which were in a catch-up process. In Greece and Italy, real GDP per capita was the same or even slightly lower in 2018 than in 2000 (see Figure 6.1). This divergence has strained relations and fuelled distrust and resentment, at a time when decision-making has shifted from the European Commission to the leaders of the EU’s stronger countries.

A North–South economic gap has long been present in the EU; successive waves of accession countries expanded geographical boundaries but also brought in increasingly divergent economic models and levels of development. To counteract this, the stated aim of greater convergence within the Union gave birth to mechanisms such as those of the EU structural funds, aimed at building infrastructure or capacities more generally in the weaker economies. These have helped close some of the economic gap. They did so in the context of differentiated economic strategies in the “laggard states”, with some countries more effective at economic catch-up than others.

The eurozone crisis, however, has made internal divisions more evident by re-opening the economic gap. All countries felt the brunt of the 2007–9 global financial crisis, but there are striking differences both in terms of the path into the eurozone sovereign debt crisis after 2009 as well as in terms of how countries came out of it.