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Big Economic Divides Remain in EU Regions

February 19, 2010

Eurostat, the EU statistical office, released the regional GDP per inhabitant for all 271 NUTS II regions in the EU.  This data is from 2007, so it is snapshot of the economic situation in the EU before the current economic crisis began, yet is shows trends that are relevant to the fiscal crisis in the EU today.  The first is the huge disparity in wealth across the EU, as the Bulgarian region of Severozapaden had per capita GDP that was 26% of the EU27 average while Inner London is 334%.  Unsurprisingly, the ten poorest regions were in Bulgaria (5 regions), Romania (4), and Poland (1).  However, while Western Europe dominated the ten richest regions, Prague was the fifth richest and Bratislava was 12th.  Thus, some post-Communist regions have managed to catch-up with their neighboring West European regions, but a lot of work remains.

Even within the Eurozone, there is a large disparity with Grand Duchy of Luxembourg being 2.75 times as rich as the EU27 average while Východné Slovensko in Slovakia is less than half (46%).  This range is equivalent to a per capita €71 200 (or €57 000 at purchasing power standard).  While it is not too surprising that such disparities make it very hard to create a monetary policy that fits the needs of all the regions within the Eurozone’s 16 members; this assumption cannot be taken too far.  Four euro members (Malta, Portugal, Slovakia, Slovenia) are poorer in per capita terms than Greece and only in one (Portugal) has there been much concern about the state of its finances.  At the same time, the other euro member to have really suffered in the last two years, Ireland, was the second richest country to use the common currency in this table before the financial crisis.  Thus, being poor does not necessarily lead to fiscal crisis, but it certainly can complicate fiscal situations.

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