... trade between unequals also applies to nations which form the EU trade bloc. Given that the core countries – in this instance Germany/Austria, Benelux and Scandinavia – have higher productivity and lower cost levels this will, given the same currency usage which is the case in the Eurozone, result in trade surpluses for the core economies and trade deficits for the peripheral economies who have higher costs lower productivity and cannot devalue. Or, more precisely can only opt for ‘internal devaluation’ – otherwise known as austerity.
However, latest annual GDP growth figures for the big 4 has been uniformly poor. As follows: the UK 1.5%, France 1.4%, Germany 1.1% and Italy 0.7% (Source: Trading Economics). Growth of this level almost guarantees rising unemployment and weak levels of investment. Additionally, the EU’s southern periphery has been staked out on the ant-ill of internal devaluation but was pulled out of a lasting downturn due to an (admittedly weak) global recovery which started circa, 2010. At the present time GDP growth in the Euro area as a whole is 1.6%, which does not include the Eastern periphery – apart from the Baltics – since they do not use the euro currency.
It is also worth bearing in mind that these states started from a very low base. A high rate of growth in a poor(ish) country can always boast high GDP when starting from ground zero. So, Poland, very much the blue-eyed boy of the western financial institutions, clocked up 5% GDP growth in the last financial year. Impressive, until you read on and discover, firstly, that Poland has a lower per capita income than Greece, the poorest country in western Europe, and that Bangladesh had a growth rate of 7.4% and Pakistan 5.79%.
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