Crisis in the Eurozone: some popular fallacies and a few unpleasant remarks

Paradoxically, the fact that financial markets believed that real convergence between the Euro periphery and Euro core would have occurred as a consequence of the Euro led to real divergence and external imbalances within the Eurozone. After the outbreak of the European debt crisis, austerity policies in the peripheral countries of the Eurozone simply had no alternative, given the refusal on the part of the markets to go on financing levels of private and public expenditures structurally in excess with respect to the value of the goods and services that the peripheral countries were able to supply at competitive prices. Could the resulting recession in the periphery have been made less severe by larger inflow of funds from the rest of the Eurozone and prompter interventions of the ECB? And why the Euro periphery made only modest gains in competitiveness during the 3 years of acute recession that followed the outbreak of the crisis? This is a crucial issue since there is no possibility of sustainable long-run growth for the periphery without restoring its competitiveness vis-à-vis the Euro core and the rest of the world.