Is there Convergence or Divergence in the International Competitiveness of the Eurozone Countries?

The unexpected Eurozone Sovereign Debt Crisis (2010–2012) aroused different attempts of interpretation among analysts and practitioners. While some attributed the crisis to a “contagion” effect of the Subprime Mortgages Financial Crisis in the United States (2007–2009), others saw in it an expression of deeper fundamental economic imbalances. This chapter presents an evaluation of whether there is convergence or divergence in the sectorial international competitiveness of the Eurozone area countries. A Dynamic Panel Data analysis on country-level exports for all Eurozone members for a period that goes from 1993 to 2014 finds significant evidence of international competitiveness convergence in four- out of 10-export sectors, and no significant evidence of divergence in the rest. While that evidence is not consistent with the high expectations generated by monetary integration more than 15 years ago, those four sectors correspond to high value-added economic activities and, in that sense, indicate a more homogeneous productive modernization process is taking place in the area.