Germany’s prosperity has received a huge boost from the euro but the impact of the single currency has been starkly negative for other members of the eurozone, a new report commissioned to mark the 20th birthday of the project has revealed.

“Twenty Years of the euro – winners and losers” is published this week by the Centre for European Policy. Dr. Matthias Kullas, Head of the Department of Economics and Fiscal Policy at the CEP, and Alessandro Gasparotti, a Policy Analyst in the Department of Economics and Fiscal Policy at the CEP, modelled the contrasting fortunes of eight key eurozone economies. They explore the consequences of the euro being undervalued for Germany and  overvalued for France and struggling Italy.  The results are not pretty.

They conclude:

“Germany has gained by far the most from the introduction of the euro; almost € 1.9 trillion between 1999 and 2017. This amounts to around € 23,000 per inhabitant. Otherwise, only the Netherlands has gained substantial benefits from the introducing the euro.

In the first few years after its introduction, Greece gained hugely from the euro but since 2011 has suffered enormous losses. Over the whole period, the balance of € 2 billion or € 190 per inhabitant, is only just positive.

In all the other countries analysed, the euro has resulted in a drop in prosperity:€3.6trillion in France and as much as € 4.3 trillion in Italy. In France, this amounts to € 56,000 per capita and in Italy € 74,000.”

Credit to Andrew Neil for highlighting the report.

Kullas and Gasparotti claim that with the exception of 2004 and 2005, Germany has benefited every year as a result of the introduction of the single currency, especially since the euro crisis in 2011.

Aggregated over the period 1999 to 2017, the euro has led to increases in prosperity in Germany of € 1.9 trillion overall or € 23,116 per capita. Thus, out of the countries examined, Germany has gained most from the euro.”

They note the impact on France, but point out that France has failed to implement the required structural reforms to its economy that President Macron is now attempting.

“In France, accession to the eurozone has led to losses in prosperity every year. These losses add up to € 3.6 trillion since the introduction of the euro. This corresponds to a loss of € 55,996 per capita. After Italy, France is therefore the country in which the euro has led to the largest losses. This trend shows that France has still not found a way to strengthen its competitiveness inside the eurozone. In the decades prior to introduction of the euro, France regularly devalued its currency for this purpose. After the introduction of the euro, that was no longer possible. Instead, structural reforms were needed. In order to benefit from the euro, France absolutely has to stick to the path of reform that President Macron is pursuing.”

German efficiency plus the euro means that the country has cleaned up as an exporter.

Ironically, when the single currency was devised it was seen by President Mitterrand of France as forcing a concession from the German government in exchange for the smooth passage of German reunification after the Berlin Wall came down. But giving up its currency has been great for German prosperity; it’s the other countries that have been clobbered.