The promised LAND or a mirage? The puzzling divergence of the euro AREA’S periphery

This paper examines whether the Economic and Monetary Union (EMU) has fostered convergence in income and productivity among peripheral member states. Using the Convergence Quadrants framework for 1992–2019, it identifies divergence relative to the core, which intensifies after 2009. Productivity analysis shows an initial catch-up phase from 1992 to 2008, followed by a sharp post-crisis reversal. The findings suggest that this later divergence is driven by structural deterioration, particularly a weakening of dynamic increasing returns to scale (the Verdoorn effect) in peripheral economies. Overall, post-crisis stagnation appears not purely cyclical but rooted in weakened structural conditions for demand-led productivity growth.