Convergence: Keeping up with Europe's big boys!

3 months ago Euronews Business |

Did you know that all EU countries must meet four accession criteria to converge into the euro? Yet an important lesson of the financial crisis has been that you can’t stop having strong economic policies once you have simply entered the euro club.  They need to continue for us to have sustainable and real convergence. That is when a low income country really catches up with a richer one. To better understand how it works, here is our crash course: Staying on track Like racers in a car club, countries who want to join the euro club must meet the Maastricht             convergence criteria. But once in, they have got to keep revamping to keep up with powerful racers to achieve a close race  and converge. The low income country would need to remodel itself and increase real GDP for a strong position in the race with richer countries. That means a makeover of weak institutions and governance to match the power of institutions of richer countries. This would increase living standards of citizens to levels closer to other club members. Productivity of the country’s pit crew or it’s labour force must also increase to make the country’s economy competitive. This would keep inflation under control and install the shock absorbers, making the country and the club resilient to violent jolts. Making Portugal Productive Portugal is a great example of the challenges of real convergence.  After almost going bankrupt during the financial crisis, the country’s economy is now bouncing back, growing more than the EU average - its efforts acknowledged by European Commission Vice President Valdis Dombrovskis. Yet if you take a look at the GDP per capita of the country, that is still below pre-crisis levels.  So, it needs to address reforms in productivity to really play catch up to richer eurozone countries, as Real Economy reporter Charlotte Kan found out. "Despite being one of the EU nations working some of the longest hours, the productivity of Portuguese workers is below the EU28 average," ou

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