Progress towards real convergence
among the 12 original eurozone countries has been
"disappointing", with Italy among the laggards, the European
Central Bank (ECB) said Thursday.
The central bank singled out Italy in particular for its
below-average economic growth since the eurozone founding in
1999, contributing to an increased divergence between economies
in the euro area.
In an economic bulletin, the ECB also looked at the current
economic picture, and said that the nascent recovery in the
eurozone is set to broaden.
The ECB reported "moderate growth" in the April-to-June
period of this year, with the prospect of a further broadening
of the economic recovery.
Measures taken by the central bank, along with structural
reforms, rebalancing of budgets, low oil prices and exports
should all help drive domestic demand, the ECB added.
Meanwhile, the goal of economic convergence among the
original eurozone members was undermined in weaker States like
Italy, the report said.
Such factors as low capital inflows, labour productivity
that is "well below the euro average", and a poor quality of
governance of public institutions have all contributed to the
economic weakness.
"Little real convergence has taken place among the
euro area economies since the establishment of
the euro, despite initial expectations that the single
currency would act as a catalyst for faster real
convergence," the ECB wrote in the bulletin.
"There is no clear relationship between relative GDP per
capita levels in 1999 and their relative growth between 1999 and
2014," it added.
"Italy, initially a higher-income country, recorded the
worst performance, suggesting substantial divergence from the
high-income group".
That predated the global economic crisis that began in
2007, suggesting that more deep-rooted factors were at play
among the original 12 eurozone members.
The bulletin focussed attention on the "quality of domestic
institutions and governance" in relation to their economies' per
capita income growth.
The ECB said that countries with a higher ranking in terms
of governance tended to also show higher income levels.
It added that the euro-area countries that did not show
convergence - or, in fact, diverged in the pre-crisis
years - were also the States with the poorest rankings in terms
of governance.
Those, it said, included Italy, Greece, Spain, and
Portugal.
Such a low ranking "reflected such factors as the
effectiveness of government, the quality of the regulatory
environment and the size of the informal economy".
"All these factors have a significant bearing on long-term
growth," added the report.
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