Unsolved Asymmetries and Complex Productive Structures in the Eurozone

Abstract: Abstract: The severity of the crisis in the Southern Eurozone countries is frequently attributed to inflated economies and reckless spending. Thus, it isn’t surprising that the main interpretation is that the crisis ought to be solved by decreasing government spending and lowering wages. This paper argues, instead, that one of the core underlying reasons for the severity of the crisis in the Southern Eurozone is grounded in large differences in productive structures. These large differences have an historical origin and have never been addressed properly. In this article, we provide clear empirical evidence for large and deeply engrained productive structure differences between the Northern Eurozone and Southern Eurozone. This paper concludes that economic divergence within the Eurozone has not, and is unlikely to be, solved by market dynamics alone. Hence, this paper argues that to create the right environment for sustainable long-term growth and convergence in the Eurozone, strategic investment in the productive structures of the Southern Eurozone is drastically needed. Lastly, this paper suggests that further research is needed to identify concrete products and a realistic plan to carry out the industrial reforms successfully.