[해외포커스]”After Corona 19, the economic power gap between Northern and Southern Europe will widen.”

[이데일리 이윤화 기자] As the economy in Europe contracts significantly due to Corona 19, the gap in economic power between countries in the euro area is expected to widen further. Since the European fiscal crisis, as the economic situation among countries in the region has been differentiated, questions about the sustainability and effectiveness of the euro single currency region have been steadily raised.

As the economy in the euro area contracted significantly due to the recent Corona 19 effect, there are concerns that the fiscal crisis in Europe, which began with Greece at the time of 2011-2012, may recur.

In a nursing home in Halberstadt, Germany, on the 26th of last month (local time), doctor Bernhard Ellent (left) is vaccinating residents with the Corona 19 vaccine. (Photo = Yonhap News)

In the Overseas Economic Focus published on the 10th, Kwak Beop-joon and Kwak Yoon-young, manager of the Bank of Korea’s U.S. European Economic Team, published a report on the subject of “the status and implications of the economic gap in the euro area after Corona 19” and delivered such a report.

According to the report, as a result of examining the major economic indicators in North and South Europe, the gap between regions widened after the global financial crisis and the European fiscal crisis, for major real variables such as economic growth, unemployment rate, and national debt ratio. Was further expanded.

After the financial crisis, the gap in national debt between the two regions in the region widened, as fiscal expenditures in southern Europe increased rapidly after Corona 19. The standard deviation of the growth rate among countries to GDP was also found to have more than doubled compared to 2019. The gap in the national debt ratio is expected to widen from 60%p in 2019 to 72%p in 2020. During 2019-2021, the growth rate of southern European countries such as Italy (-3.6%) and Spain (-3.1%) was significantly lower than that of Northern European countries such as Germany (-1.0%) and Austria (-0.8%).

The gap in economic growth between countries in the euro area and the status of cumulative growth by country. (Source = Bank of Korea)

Five countries, Austria, Belgium, Finland, Germany, and the Netherlands, are classified as Northern Europe, and four countries, including Greece, Italy, Portugal, and Spain, are classified as Southern Europe.

In particular, the first Corona 19 spread in Italy and the spread of the virus was also rapid. As a result, strong measures to prevent the spread in southern Europe were implemented, resulting in a relatively sharp decline in the real economy. Due to the nature of Corona 19, which is transmitted through face-to-face contact, southern Europe, which has a relatively large proportion of service industries such as food, lodging, and travel, suffered more serious economic losses than northern Europe, which is mainly focused on manufacturing.

In addition, in the case of Southern Europe, the lack of fiscal capacity compared to Northern Europe and the low economic stimulus effect of monetary and fiscal policies contributed to the widening gap between South and Northern Europe due to the pandemic.

Before the pandemic, the widening gap in economic power in the euro area has deepened the economic dependence of southern Europe on Northern Europe. As the concentration of economic power between regions in the region intensifies, the southern European labor force has moved to Northern Europe, which is superior in wage levels and employment opportunities, and the growth potential of southern Europe has weakened.

In addition, as the economic structure fixed in the center (northern Europe) and the periphery (southern Europe), southern European political support for the euro and the EU weakened and the conflict grew. The COVID-19 outbreak is expected to intensify this trend.

The report said, “European single currency system is expected to continue despite the widening of the economic gap between regions, but the concentration of economic power and the resulting accumulation of mutual complaints between South and Northern Europe are challenges that must be overcome in the future.” The necessity of fiscal consolidation emerges, and there are some achievements such as the launch of the Economic Recovery Fund as part of this, but it will take a lot of effort and time to resolve conflicts of interest between countries and move toward full economic integration.