Europe in Crisis: Introduction

The economies of the Euro area (EA) are in crisis. According to the European Commission, EA GDP remains 2.1% below pre-crisis levels. However, these aggregate figures mask substantial cross-country divergence. While there has been a weak recovery in Germany (up by 2.9% of GDP since 2009), southern European countries are in a much worse shape. Real GDP in Greece has declined 23.3%; in Spain the decline has been 6.4%, in Italy, 7.1% and in Ireland, 2.9%. The social costs of this crisis are enormous. Greece and Spain suffer from unemployment rates above 25%. This crisis poses profound questions about the nature of European integration, its macroeconomic policy regime and, possibly, the future of the common currency itself