Asymmetric macroeconomic and growth problems of small MICs in the EMU

The thesis of this article is that a small country with an income below the average per capita income has an initial disadvantage position inside the euro area. It has an instability disadvantage because of higher sensitivity to asymmetric shocks from abroad due to “one-fits-all” economic policies on the EMU level. This is reflected in the excessive volatility of real economic variables (e.g., GDP and unemployment), and excessive financial instability (e.g. indebtedness). It has growth problems, which is reflected in the decreasing price competitiveness and asymmetric agglomeration effect inside euro area.  Decreasing internal price competitiveness is reflected in weak external and internal competitiveness of exports. Competitive catching-up growth is therefore harder to achieve. Measures of internal and fiscal devaluations may partially improve situation in the medium term, and worsen the competitive growth situation in the long run. The article discusses and empirically illustrates the issue of recession and the weakening competitiveness of small below-average-income countries under the conditions of the common currency.