The current good performance of the economies of the South and the periphery of the eurozone, among them Spain and Ireland, after the severe crisis they went through a little more than a decade ago, serves as an example to the other European partners of the advantages of addressing structural problems that still remain evident in some countries in the area, especially in Germany and France, as the executive of the European Central Bank (ECB), Isabel Schnabel, has highlighted.
In an address at an event of the Bank of Lithuania, the German representative on the executive committee of the ECB, who will leave her position at the end of the year to join in January the International Monetary Fund (IMF), has rejected the image of Europe as a continent in decline and has focused on the strong differences between member states. She has also reiterated the need to fully take advantage of the potential of the Single Market to achieve, in her view, what is still lacking in the region, "not talent, nor ideas, nor research, but scale".
Along these lines, Schnabel has cited as an example the progress of the southern euro economies, which today lead growth, when ten years ago "this region was synonymous with crisis, austerity and runaway unemployment". That change has been achieved, she said, thanks to the removal of structural obstacles, which has made it possible to create room to cut deficits without slowing down the recovery, thereby facilitating fiscal consolidation and strengthening the sustainability of public debt.
"To a large extent, the dynamism in the southern periphery reflects a sustained improvement in underlying economic capacity," she said, recalling that the European Commission projects that the potential growth of Spain, Portugal and Greece will clearly exceed the eurozone average in the coming years. Added to this is the effect of instruments such as Next Generation EU, which have mobilized substantial common resources to boost investment, accelerate reforms and strengthen growth potential in countries with little fiscal room to deal with the impact of the Covid-19 pandemic.
The German economist has particularly emphasized the case of Spain, which has consolidated itself as a European benchmark in renewable energy. This leadership has helped to significantly lower wholesale electricity prices and to reduce the country’s exposure to fluctuations in international energy markets, turning it into a strategic European hub for energy-intensive industries of the future.
"This transformation is the result of political decisions and social resilience," she argued, recalling that these economies had to assume complex adjustments during the structural change process, and that citizens accepted those sacrifices.
By contrast, Schnabel believes that economic tensions "are felt with greater intensity in the traditional core of the euro area, although for different reasons," referring to pressures on public accounts in France, Germany’s stagnation, and the difficulties faced by several Northern economies in regaining the dynamism that existed before the pandemic.
In the case of Germany, the ECB member has stated that "with an ambitious reform agenda and a bold investment initiative," the country could attract more private capital, innovation, and growth, and she added that, given its fiscal position, "Germany can afford this response," especially if the measures help to reverse the downward trend in potential growth.
In any case, at the European level, Schnabel has insisted that the continent’s main challenge is not the absence of talent or ideas, but the lack of scale. For this reason, she has argued that the so-called '28th regime,' which seeks to establish a unified and optional corporate framework that coexists with the 27 national legislations of the EU Member States, constitutes a concrete and effective proposal to move forward toward a fully integrated and operational Single Market.