Europe’s Competitiveness Obsession
The EU is now obsessed with closing the competitiveness gap that has emerged between eurozone countries. But this approach risks leading in the wrong direction, because competitiveness is a relative concept: restoring competitiveness in some countries, such as Greece and Spain, would require others (Germany in the first instance) to accept deterioration in theirs.
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BRUSSELS – The President of the European Central Bank is said to show at each meeting of the European Council a graph depicting the evolution of relative wage costs across the eurozone’s 16 member countries. This chart shows increasing divergences over the last ten years, with the countries now facing difficulties (Greece, Portugal, and Spain) having lost competitiveness by around 20% relative to Germany. In other words, since 1999, wage costs have increased by about 20% less in Germany than in southern Europe.