EMU and Economic Inequality. Friend or Foe?

After 2008, Eurozone’s citizens and national politicians especially in countries most hit by the crisis often blame for the increasing inequality and social repercussions their most recent and obvious experience with the Euro. However, International Organizations warn that inequality has been on the rise the last few decades not just in European Economic and Monetary Union (EMU) and in Europe, but in most developed economies around the world, with the financial crisis contributing further to this global trend. Despite the increasing societal interest, neither the theoretical links nor the empirical evidence that link EMU and inequality have been systematically examined. Thus, this paper identifies the need to investigate whether these anecdotal concerns about the “Euro-zone” effect on economic inequality are well founded or whether they constitute a political perception trumping the economics. This analysis discusses the theoretical links between EMU and economic inequality and examines inequality developments in EMU member states since the adoption of the common currency. By comparing when appropriate with data of the rest European Union countries and by looking how the distribution of income has involved between different income quintile groups, this paper reveals that inequality has not always been on the rise in the Euro-area’s member states and that it has not been evolved in uniform manner, across EMU and non EMU samples.