The risk of the increasing divergence of the eurozone and the problem of macroeconomic imbalances in a three-gap model

Abstract

The negative effects of the last financial and economic crisis as seen in the deterioration of the state of public finances of the eurozone Member States highlighted weaknesses in the present institutional system. The fact that structural reforms have stopped, as well as unfavourable demographic changes, make the convergence processes and the growth of eurozone economies slow down. Increasing divergence with regard to trade balance deficits, budget deficits, investments and private savings is a significant limiting factor here. The aim of this paper is to answer the question as to whether the present situation of the eurozone economies is of a convergent or divergent nature. For this purpose the following have been analysed and assessed: the last financial crisis’ consequences for eurozone countries; basic indicators related to the EU Member States’ macroeconomic situation; domestic economies convergence/divergence in the eurozone – in relation to other Member States; increased divergence of regional development within a country, the so-called regional divergence; criteria of convergence; macroeconomic factors and – as mentioned before – the listed indicators resulting from the research method adopted. The method of study in this paper was the analysis of the risk of the eurozone’s macroeconomic imbalance on the basis of the three-gap model. Results of the analysis showed significant imbalances within individual economies in terms of all the above mentioned parameters. This analysis showed the increasing trend related to eurozone divergence.