Wood, R., (2013), “Europe: The Failure of Internal Devaluation”, EconoMonitor, 13 Νοεμβρίου.
Quite apart from the resolution of debt and banking/credit problems, differences in competitiveness, and external account imbalances, are central considerations impacting on the success or failure of the European experiment with a common currency. This short article looks beyond simple cross-country comparisons of unit labour cost trends and evaluates the role that austerity policies have played in relation to the failure of internal devaluation. An alternative policy approach is proposed for discussion.
Many European countries are now facing multiple complications: deflationary tendencies are strengthening, public debt burdens and unemployment continue to rise, and the internal devaluation process is failing.
In his recent VoxEU article ‘What’s wrong with Europe’, November 5, Paolo Manasse notes that in some peripheral economies price and wage rigidities have amplified the recessionary impact of demand shocks. In his VoxEU article ‘Austerity and stupidity’, November 6; Lorenzo Bini Smaghi demonstrates, inter alia, that countries that are at the lowest end of the competitiveness ranking are also those that have grown less after the crisis, a not unsurprising result.
This article expands on the competitiveness theme as, with a common currency in many countries, continuing differences in competitiveness must be a central consideration in the unfolding European tragedy.
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Σχετικές Αναρτήσεις
- Lizoain, D., (2013), “Notes on Internal Devaluation”, Social Europe Journal, 27 Σεπτεμβρίου.
- Cohen-Setton, J., (2013), “Blogs review: The deflationary bias of Germany’s current account”, Bruegel, 06 Νοεμβρίου.
- Charlemagne, (2013), “Fawlty Europe”, The Economist, 01 Νοεμβρίου.