living is particularly due to the fact that the wage level in the poor member
countries is relatively low and as a result, non-tradeables, and service in
particular, are relatively cheap.
For 6 Member States (Portugal, Spain, Greece, Sweden, France, and Germany)
there is a clear convergence with the EU level of both standards of living and
price levels. Belgium diverges both with respect to standard of living and price
level, whereas the picture is more blurred for the remaining countries.
Figure 7. Convergence of standards of living and price levels, 1984-86 and
1997-99
Note: The arrows illustrate the change between the three-year averages 1984-86
and 1997-99. The GDP deflator is calculated as the ratio of GDP in euro and
GDP in PPS. B = Belgium, DK = Denmark, D = Germany (1984/86 West
Germany only), EL = Greece, E = Spain, F = France, IRL = Ireland, I =
Italy, NL = The Netherlands, A = Austria, P = Portugal, FIN = Finland, S =
Sweden, UK = United Kingdom (Luxembourg is unlisted).
Source: EU Commission (1999a). Annex: Tables 5, 6, and 9. Authors’ calculation.
To sum up. The above has examined the question of whether or not the
economic conditions in the EU member countries have become more similar. It
is evident that the countries have forged closer ties in the past 40-50 years. The
creation of the customs union and the Single Market has stimulated trade
between the countries and thus contributed to more uniform prices of individual
goods. Similarly, in the monetary area, the development has clearly been
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