Real Convergence in the Euro Area. Are the New Member States Catching Up or Falling Behind?

The establishment of the Economic and Monetary Union and the accession of the Central and Eastern European countries have created both opportunities and challenges for the regional group. Nowadays, one of the most pressing challenge for the European Union is to achieve longterm economic convergence between its Members. The main purpose of this paper is to examine real convergence in the Euro Area by focusing on the economic performances of the New Member States. In order to capture the evolutions that occurred in the Euro Area between 1995 and 2019, we have studied β- and σ-convergence models. The results of our study suggest that the New Member States included in the Eurozone have made considerable progress in terms of catching up, experiencing higher growth rates than the early adopters. While in the New Member States, the income gaps significantly decreased between 1995-2019, the early adopters experienced an opposite trend: divergence. Consequently, in spite of the positive path of the New Members, convergence remains a desirable goal for the Euro Area.