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Category Archive: Competitiveness
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All of the Euro Area Usual Competitive Suspects in One Chart…But with a Twist
The European Commission’s Economic and Financial Affairs initiated the Macroeconomic Imbalance Procedure (MIP) Scoreboard. The MIP Scorecard will be used to identify emerging or persistent macroeconomic imbalances in a country. In their inaugural release, the EC listed 12 EU countries in need of further review for potential imbalances (program countries are exempt from this review [...]
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Does Latvia Give Us Any Clues?
Short answer: yes, as long as global trade growth is negligible. Over the weekend I came across a December CEPR paper about the Latvian economy. Authors Mark Weisbrot and Rebecca Ray highlight the Latvian experience with internal devaluation, which may prove to be a case study for the current Eurozone model of internal devaluation by the [...]
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Unfounded Obsession With the Greek Minimum Wage
The Greek minimum wage is apparently a point of contention between the Troika (ECB/EU/IMF) and the Greek government. The NY Times cites competitiveness gains as a rationale for the minimum wage cut: The goal of any pay cuts would be to help make Greek workers, who are generally less productive than workers elsewhere in Europe, [...]
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EA Infernal Devaluation Progressing
The EU answer to rebalancing portfolio and trade flows within the Euro area (EA) without currency devaluation is recession and deflation. They call this ‘internal devaluation’ – shifting relative prices by reducing domestic demand in the debtor countries, thereby shifting the terms of trade. Marshall Auerback calls it ‘infernal devaluation’. Marshall’s right. Today we got more [...]
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EA Balance of Payments: the Current Account
I’ve been doing quite a bit of research on the balance of payments flows within the Euro Area (EA). Given the complexity of the balance of payments, there are too many angles to tackle in one post. Therefore, spanning the next week I will dedicate my commentary to the EA balance of payments. In this [...]
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European Policy Makers Don’t Understand But Markets Do
So here we are: the Italian yield curve is flat at above 7%; the government institution is in question; and the ECB is using its SMP purchase program as a carrot to drive austerity implementation in and Berlusconi out. Some would argue that the ‘market is irrational’ – Italy faces a liquidity not solvency crisis. That’s the [...]
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This ‘Competitiveness’ Thing Is a Scam
What is ‘competitiveness’? It’s an important part of the euro area leaders’ negotiated terms in the July 21st Summit announcement by the European Heads of State. The first paragraph, #4, and #11 of the announcement all refer to this issue of ‘competitiveness’: We also reaffirm our determination to reinforce convergence, competitiveness and governance in the [...]
