THE COMPETITIVENESS OF EUROZONE PERIPHERY COUNTRIES’ ECONOMIES AND THEIR DEBT PROBLEMS

Abstract

The article describes that after the periphery PIGS countries (Portugal, Ireland, Greece and Spain) joined the Eurozone, several factors previously improving PIGS' export competitiveness (undervalued national currency, protective customs duty, low compensation of employees) no longer work. It is revealed that in the pre-crisis years the rapid GDP growth in PIGS took place considerably by means of foreign loans. Moreover, external debt bubbles grew: high rates of economic growth facilitated the inflow of new foreign money used for both reinvestment and current external debt service. Besides, the share of «tradable» goods (that can be moved between countries and internationally traded) decreased in the GDP structures of PIGS. During the crisis, the PIGS' economic situation got worse (growth of external and public debts, decline in the GDP and in the investments, high unemployment). Conclusion: the Eurozone should either strengthen the integration (to increase the unification of laws in the economic and social spheres, to tighten control by the Eurozone central authorities), or get rid of the troubled countries. Otherwise, the current crisis, repeatedly flaring and fading, will persist for a long time.

Keywords

• Еврозона
• периферийные страны
• государственный долг
• экспорт
• конкурентоспособность
• сопоставимый уровень цен
• торгуемые товары
• Eurozone peripheral countries
• public debt
• exports
• competitive-ness
• comparative price level
• tradable goods