We revisit the euro’s promise of convergence through a new Divergence Monitor tracking business and financial cycle synchronization since the 1980s. Business cycles became more aligned after 1999, but financial cycles stayed volatile and split into persistent core–periphery clusters. As inflation gaps persist and enlargement continues, one monetary policy increasingly risks misfitting many.
Link to Policy Paper: 2026_04_PP01_Bugdalle_Pfeifer
