During the Covid-19 epidemic, Europe acted towards the Eurozone countries as a shield to avoid a sovereign debt crisis that had shaken the zone after the subprime crisis.
The IMF estimates that Greek debt has increased by almost 22 points to 200% of GDP this year, Italian debt by almost 21 points to 156% and Spanish debt by 18 points to over 113%. France, Portugal and Belgium will also be hard hit. On the other hand, Germany is expected to increase its debt by only 9 points to 69% and the Netherlands by 10 points to 58%. Austria, Finland, Slovakia and the Baltic States will experience similar or slightly higher increases, but at levels well below those of the southern states.
For example, at the time of the 2011 crisis, Greek debt represented 172.1% of that country’s GDP, well below its current level of indebtedness. However, no lender is questioning whether Greek bond investments should be rejected, as they are bought directly by the ECB.
However, while this state of affairs proves beneficial in the short term to the countries of Southern Europe, since it helps to cushion the consequences of the epidemic, it has the disadvantage of increasing the North-South divide.
Northern countries with lower debt ratios will be able to call on the Market to raise the investment needed to strengthen their industry and modernize it to meet the requirements of ecological transition and sustainable development. In particular, renewable energies, electric cars, autonomous vehicles, Industry 4.0, smart cities, smart grids…
The North-South divide will eventually result in a slow economic decline of countries that were at the origin of the European Union: Greece, Italy, Spain and France. The disparities will increase the political risk and the strengthening of nationalist and eurosceptic currents. Yet an exit from the Eurozone, or even from the European Union, thinking that it would gain flexibility and competitiveness thanks to the weapon of devaluation, would in fact aggravate the problem: mistrust, high rates of remuneration for risk, low industrial asset prices.
The countries of the South would lose their financial autonomy, their industries would be easy prey to strengthen the groups of the North, on which they would eventually depend. The result would be the opposite of the desired outcome, i.e. pseudo political independence for greater economic dependence.
The only way for the prosperity of the people is to strengthen Europe and intensify European integration.