What does that mean for social cohesion in Europe?
In theory, we should be witnessing a healthy structural change, with advanced nations focusing increasingly on premium products, and those still needing to catch up capitalising on their wage advantages. According to the model, all national economies would grow and so would general prosperity. In reality, however, this will only happen if there is demand for sophisticated goods in poor countries and, currently, there is not enough demand in Europe. The result is that people in rich nations are becoming unemployed without new high-tech jobs being created. Considering the problems of Germany’s internal monetary union from 1990 on, wouldn’t it be tough for the accession countries to expand the Euro area to the entire EU? Yes, that is so, and this is why the European Central Bank and the European Commission are also taking a very conservative approach in this matter. If the monetary union is extended, and wages are raised without regard to productivity, the competitiveness of the weaker pa
