8 Jul 2011

Much has been written in recent years about the financial crisis that has affected Southern Europe (and Ireland). Most of it however has focused on macroeconomic factors such as deficits and debt and little has been said about the more structural economic conditions that led these countries to the brink of financial ruin. A forthcoming paper by Hadjimichalis (2011) provides a key contribution to this debate, using an economic geographical approach to highlight the geographically uneven patterns of economic development in the EU.

As discussed by the author it would be wrong to ignore these nations’ internal problems, such as the misuse of structural funds or bad governance. However, it is also important to understand how these factors have been magnified by the creation of the Euro Zone, which has disproportionately benefited countries at its core. The figure below illustrates the extent of this problem.

Source: Hadjimichalis (2011)

The loss of competitiveness for countries in Southern Europe is mostly a result of rising labour unit costs. On the other hand in places such as Germany increasing competitiveness has been achieved at the expense of working class incomes. The product of these imbalances has been negative trade balances, as the next figure shows.

Source: Hadjimichalis (2011)

Overall Hadjimichalis (2011) explores the importance of external and structural factors in the current crisis and argues that economic geography has not been capable of providing useful contributions to this debate as a result of its focus on a narrow range of local factors as the sources of economic success. This paper is therefore both an informed discussion of the current economic crisis and a reflection on the shortcomings of existing theoretical frameworks.


Reference
Hadjimichalis, C. (2011) Uneven geographical development and socio-spatial justice and solidarity: European regions after the 2009 financial crisis, European Urban and Regional Studies, 18 (3), pp. 254-274