European and Greek Flags

A tale of two Eurozones: Greater Germany and Club Med are drifting ever further apart

At the end of last week Federica Mogherini met leading members of the Trump administration.

Mogherini, yet another Italian politician turned Euro-bureaucrat, is in fact the foreign policy chief of the European Union. She stood on her dignity, or rather the dignity of the European Commission, issuing a warning to America not to interfere with politics in Europe.

We might reasonably wonder what American armed forces have been doing for the past 70 years, effectively providing the defence of Continental Europe and so sparing local politicians the need to raise taxes to pay for it themselves. But this free riding by Europe is apparently an acceptable form of interference. On anything else, America has to be “warned”.

Mogherini went on to surpass herself, claiming that “the strength of the EU and the unity of the EU I believe is more evident today than it was”. Certainly, this “strength” and “unity” are on full display in the latest instalment of the Greek debt crisis. Output in Greece is over 20 per cent lower than it was in 2007, 10 years ago. And the Germans are showing the greatest reluctance to put their hands in their pockets yet again to bail out the Greeks.

More generally, the data on output – GDP – reveal an absolutely fundamental split between the economies of the EU. What we can think of as Greater Germany has performed far better since the financial crisis than the Club Med.

In the former group, to Germany itself we can plausibly add economies such as Austria, Poland, the Czech Republic, the Netherlands and Belgium. The Club Med is represented by France, Spain, Portugal, Italy and Greece.

To put it starkly, Greater Germany has recovered since the financial crisis and Club Med has not. In every individual year since 2009, Greater Germany has grown faster than Club Med.

Output in the former is just over 14 per cent higher than it was in 2009, the year of deep recession with output shrinking almost everywhere in the Western economies. In the latter, it has also risen, but only by 2 per cent. And growth of 2 per cent was typical for just a single year in the decades prior to the crisis.

In 2009, the two blocs were of very similar overall size. Total output in each was around €5 trillion, with the Club Med group being slightly the larger of the two. Stripping out inflation, output in Greater Germany is now around €700bn higher than it was in 2009, and Club Med has registered an increase of only €100bn. Even removing Greece from the latter makes little difference, given that the Greek economy makes up less than 5 per cent of the Club Med group as a whole.

A massive gap has opened up between two groups of economies within the EU in the space of less than a decade. One has grown almost as much as the dynamic UK. The other languishes with growth close to zero. Strength? Unity? It’s just the way Mrs Mogherini tells them!

Paul Ormerod

As published in City AM Wednesday 15th February 2017

Image: European and Greek flags by Reithose is licensed under CC by 2.0

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Alex O’Byrne, Associate at Volterra, is an experienced economic consultant specialising in economic, health and social impact, economic strategy, project appraisal and socio-economic planning matters.

Alex has led the socio-economic and health assessments of some of the most high profile developments across the UK, including Battersea Power Station, Olympia London, London Resort, MSG Sphere and Westfield. He has significant experience inputting to EIAs and s106 discussions as well as drafting economic statements, employment and skills strategies and affordable workspace strategies.

Alex is also experienced at economic appraisal for infrastructure. He was project manager of the economic appraisal for the City Centre to Mangere Light Rail in Auckland. He also led the economic and financial appraisals of the third tranche of the Transport Access Program for Transport for New South Wales, in which Alex developed and employed innovative methodological approaches to better capture benefits for individuals with reduced mobility.

He is interested in the limitations of current appraisal methodologies and ways of improving economic and health analysis to ensure it is accessible to as many people as possible. To this end, Alex recognises the importance of transparent and simple to understand analysis and ensuring all work is supported by a robust narrative.

Alex holds a BSc (Hons) in Economics from the University of Manchester and he was a member of the first cohort of the Mayor’s Infrastructure Young Professionals Panel.


Senior Partner

t: +44 020 8878 6333

Ellie is a partner at Volterra, specialising in the economic impact of developments and proposals, and manages many of the company’s projects on economic impact, regeneration, transport and development.

With thirteen years experience at Volterra delivering high quality projects to clients across the public and private sector, Ellie has expertise in developing methods of estimating economic impact where complex issues exist with regards to deadweight, displacement and additionality.

Ellie has significant experience in estimating the economic impact across all types of property development including residential, leisure, office and mixed use schemes.

Project management of recent high profile schemes include the luxury hotel London Peninsula, Battersea Power Station and the Nova scheme at London Victoria. Ellie has also led studies across the country estimating the economic and regeneration impact of proposed transport investments, including studies on HS2 and Crossrail.

Ellie holds a degree in Mathematics and Economics from the University of Cambridge.