The past decade was a period, in which the periphery of Europe caught up strongly compared to the centre. Nevertheless, part of the catching-up process has proved to be unsustainable as a “bubble.” The pattern was the same everywhere: There was a boom in the national market, the local services and real estate prices rose sharply and wages increased faster than labour productivity.
The result is that drastically deteriorated competitiveness in relation to the centre of Europe. This went well but the market bubble finally burst – in the wake of the world financial crisis. After that, the macroeconomic imbalances was mercilessly are exposed. It comes to huge deficits in the state budget and the current account, unsafe banking systems, loss of confidence in the capital markets, debt crisis. Greece, Ireland, Portugal and Spain have lived beyond their means, because they believed that there would be virtually an automatism in the convergence in labour productivity in Europe between periphery and centre.
Nevertheless, convergence will not come so quickly. The biggest reason is the lack of innovation of the industry in the peripheral countries. The same applies in a similar form for the Central European countries and even East Germany. These are still suffering the long-term by crop damage of socialism. It is the destruction of capitalist structures through many years of political imprisonment in a planned economy with extremely innovative hostile division of labour.
For the strengthening of industrial innovation in each country is primarily the responsibility of each national economic policy. In the second place to assist where the European Union is needed. EU funding, however, requires a shift in focus away from consumer-related funding programs towards regional, science and education policy initiatives. Brief, to overcome the economic division shall require a modern growth-oriented industrial policy.
The same applies in a similar form for the Central European countries and even East Germany. These are still suffering the long-term crop damage of socialism, i.e., the destruction of capitalist structures through many years of political imprisonment in a planned economy with extremely innovative hostile division of labour.