How Governments Should Support the Adjustment of Competitiveness in the Euro Area – And How They Should Not

7 Pages Posted: 20 Oct 2012

See all articles by Holger Zemanek

Holger Zemanek

University of Leipzig - Institute for Economic Policy

Date Written: October 2012

Abstract

In addition to unsustainable fiscal policies, the weak competitiveness of southern European countries is contributing to the ongoing crisis in the euro area. However, wages and productivity are only one element of competitiveness and the value of competitive wages is hard to measure. Hard‐to‐identify non‐price competitiveness such as quality, innovation and technology of goods affects overall competitiveness too. Given the lack of information, the necessary level of wage adjustment needs to be negotiated on the market. Governments can support a market based adjustment of competitiveness by liberalising labour markets and by strengthening the business environment.

Keywords: euro area, crisis, competitiveness, labour market reforms

Suggested Citation

Zemanek, Holger, How Governments Should Support the Adjustment of Competitiveness in the Euro Area – And How They Should Not (October 2012). Economic Affairs, Vol. 32, Issue 3, pp. 78-84, 2012, Available at SSRN: https://ssrn.com/abstract=2163973 or http://dx.doi.org/10.1111/j.1468-0270.2012.02178.x

Holger Zemanek (Contact Author)

University of Leipzig - Institute for Economic Policy ( email )

Institute for Economic Policy
Grimmaische Strasse 12
Leipzig, 40109
Germany

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