Is the gap between German-led northern Europe and “Club Med” growing? The latest economic figures out of the Eurozone show that uneven growth in 2013 widened the gap between north and south. The Wall Street Journal reports:
Gross domestic product in Germany—the currency area’s largest economy—was 0.7% higher in the fourth quarter than the third, the national statistics agency De Statis reported Friday. That marked a significant pickup from the 0.1% expansion recorded by Germany in the three months to September.But economic growth slowed in France, while Italy endured its 14th straight quarter without an increase in output. Elsewhere, Greece’s economy contracted again after three quarters of expansion, a development that may reflect growing uncertainty ahead of January elections that saw the left-wing Syriza party lead a new government. Greece wasn’t alone, however, as the economies of Cyprus and Finland also shrank.
One reason for Germany’s success: Its export-oriented economy benefits when worries about the health of its partners and the stability of Europe’s monetary system make the euro cheaper against other currencies. In the same way, Germany could be the biggest winner as the ECB moves into quantitative easing; an even cheaper euro will deliver another boost to the export powerhouse.This is going to reinforce the psychological gap between Germans and their Club Med neighbors. In countries like Spain, Italy, and Greece, the public feels that Europe is going through a major crisis and that society is being stressed past the breaking point by mass youth unemployment. In Germany, people are more likely to feel that things are going well, apart from the unreasonable grumbling by hot-headed, uncompetitive Latins.The gulf in perceptions and psychology is going to make it harder for European policy makers to sell sensible compromise solutions to voters across the Eurozone.