May 4, 2015
Most of us have erroneous perceptions of the levels and differences of prosperity in the EU.
Measuring prosperity by per capita incomes expressed in purchasing power and leaving aside Luxembourg as a special case with a per capita income of € 90 000, the seven most prosperous member countries enjoy almost three times higher per capita incomes than the two poorest ones, Romania and Bulgaria. That is not shocking for a Union with 28 member states with very different socio-economic histories and half of which having co-existed for just one decade or even less and all of which retain the key competences for their economic and social policies.
Looking at the EU “prosperity map” we can distinguish four categories:
- seven countries with a per capita income (2013) exceeding €40 000, all situated in Northern Europe, (Ireland, Netherlands, Sweden, Austria, Germany, Denmark and Belgium. With the exception of Germany, these are all small countries that have been EU members since the start or EFTA members 20 years before joining in the early nineties. Size does not have an impact on the level of prosperity; and contrary to common perceptions, Germany is not the most prosperous EU country.
- Five countries with a per capita income exceeding €30 00 per year.UK, France, Italy and Spain, with the bulk of EU population, and small Finland at the extreme north-east constitute this rather heterogeneous group, marked by a shorter industrial and technological history than the most prosperous group.
- 14 countries with a per capita income of more than € 20 000 per year.These are mostly small and even tiny countries and, except for Greece (1981) and Portugal (1986), late-comers to the EU (2004 or 2012). Most of them have not known democracy or market economy before joining, which continues to leaves them with a handicap.
- Romania and Bulgaria which joined the EU only 2007 are the two laggards. They have lost much time after formal membership putting their house in order, fighting corruption and establishing competent and impartial judiciaries. It is only in the last two years that they start catching up, thanks to much improved governance. Adding their agricultural and communist heritage and their neighbourhood to two even poorer neighbours (Moldova and Ukraine) it is not surprising that their per capita incomes have not yet reached even € 20 00. But both have the potential for catching up.
Even in the USA regional income differentials continue to be substantial, the per capita income of the most prosperous states in the North-east (Connecticut, Massachusetts and New York) being still 80 per cent higher than that of some poor southern states like West Virginia and Mississippi. For a country that has existed as a fully-fledged Federation for more than two two centuries that is a big income differential.
We should therefore expect income differentials within the EU to continue for a long time, however effective structural policies in favour of the poorer member countries might be.
Brussels 05.05. 2015 Eberhard RheinAuthor : Eberhard Rhein