Some economists believe that this summer could mark the moment when some of the eurozone's peripheral members may begin to be forced out; others think that such a scenario is inconceivable. All agree that, at least in the short term, a eurozone breakup would be disastrous for jobs and growth.
But, because the outcome is unknowable, and depends on politics as much as on economics, let us leave that frightening prospect to one side and look instead at what we know about the underlying performance of the European Union economy. In short, how competitive is Europe in the summer of 2012?
If we compare the EU-15 (the membership before the enlargements of 2004 and 2007) with the United States, the most obvious point is that GDP per capita in Europe is almost 25 percent lower, a difference of around $11,000 a year. Furthermore, per capita EU productivity, which had been converging on the U.S. level for 20 years up to 1995, when Europe was only about 5 percent below the U.S., lost 10 percentage points in relative terms in the decade preceding the eurozone crisis. Europe was unable to match America's significant productivity boost from the information-technology revolution.