Economics, 3rd Edition

Growth Rates in Germany, France and the Whole Euro Area

The figure shows annual growth rates in real GDP for France, Germany and the euro area as a whole for every year from 2005 to 2014. 

French, German and euro area (17) growth rates (Latvia only joined the euro area in January 2014) tend to move closely together and 

there is no clear example of asymmetric demand shocks.

2005

–5.5

–4.5

–3.5

–2.5

–1.5

–0.5

0.5

1.5

2.5

3.5

4.5

2006

2007

2008

2009

2010

2011

2012

2013

2014

Germany

France

Euro area

Annual percentage 

change in real GDP

G

th R t

i G

FIGURE 36.3

In Figure 36.4, however, we have plotted real GDP growth rates for the euro area, Greece and Ireland 

over the same period. The problem that is evident from this graph is not so much that the turning points 

do not coincide, but that Ireland and Greece’s growth rate outstripped the performance of the euro area 

as a whole between 2005 and 2007 but then both saw considerable problems as a result of the financial 

crisis. Whilst Ireland has seen a recovery and is performing at a rate higher than the euro area as a whole, 

Greece has seen its growth shrinking throughout the period 2008–2013. Whilst the euro area as a whole 

saw some weak recovery in that period, Greece did not share in that recovery. Monetary policy for the 

euro area as a whole has not been matched to the needs of the Greek and Irish economies over the period 

noted.

Overall, therefore, the evidence is a little mixed, although on the whole it suggests that the prob-

lem of asymmetric demand shocks is not a great one for the current member countries of EMU. The 

fact that there is not strong evidence of asymmetric demand shocks at the aggregate level, however, 

does not rule out the possibility that there may be asymmetric shocks at other levels in the economy. 

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CHAPTER 36  COMMON CURRENCY AREAS AND EUROPEAN MONETARY UNION  771