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Single Euro currency has led to increase in generosity, decrease in national pride -research shows

New research from the London School of Economics and Political Science (LSE) shows that countries who have adopted the Euro single currency in the past decade have experienced a decline in national pride. However, the knock-on effect is a more generous approach to spreading wealth from rich to poor and a stronger European identity.

In a study of 10 predominantly Eastern European countries who joined the EU after 2004, LSE economists Dr Joan Costa Font and Professor Frank Cowell found a strong link between a boost in European identity, a decline in national pride and changes in economic behaviour.

People who identify themselves as European – rather than Croatian or Slovakian for example – are more likely to support redistribution of taxes favouring the poor. This contradicts standard economic models where the rich are less inclined to support taxation measures which do not benefit them.

Dr Costa Font said the findings show how powerful identity is:

“Joining the single currency and the EU has allowed smaller countries such as Slovenia and Lithuania to see the world beyond their own small communities. National pride has dropped significantly but alongside that trend, support for wealth redistribution has increased. It tells us that identity and a sense of belonging helps shape individual economic preferences.”

LSE researchers used available data from the European Value Survey involving more than 27,000 respondents from 10 countries: Bulgaria, Croatia, Slovenia, Romania, Poland, Latvia, Hungary, Estonia, the Czech Republic and Cyprus. All of them except Cyprus were former communist countries.

“What we found is that substituting their national currency with a common Euro currency has triggered changes in identity. The countries that have joined the EU since 2004 are more democratic and tolerant and less nationalistic. This has wide ranging implications for welfare economics,” Dr Costa Font said.

“For many countries, joining the Euro club has improved their status worldwide. Even through the recent crisis with Greece, overall support for the Euro has remained stable,” he added.

Younger people are more likely to identify themselves with Europe while the opposite is generally true for women, older people, the unemployed, married couples, those who live in smaller towns and people without a tertiary education.

The researchers also examined the impact of other sources of national pride – such as the number of Olympic medal tallies, changes in national history curriculum as well as language proficiency – to see if there was a correlation with European attachment.

Dr Costa Font said the overall findings have relevance for the current situation in Greece.

“Greece’s debt crisis exposed deep divisions in European solidarity, linked to identity. The German Government, for example, has not acted in post-national terms with a broader European identity in mind. Instead, it has showed a more short term view. They still think that the Greeks, Spaniards and Italians are having a good time while the rest of the EU is propping them up.”

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