Beware: The internal devaluation has not improved the long-term outlook for Spain

An internal devaluation (a squeezing of labour costs) is the normal way to improve cost competitiveness in a currency area. Spain has conducted an internal devaluation since 2009, which has made it possible to study the efficiency of this policy. We already knew that: The short-term cost of an internal devaluation is very high; After a few years, it leads to an upswing in exports, investment and employment thanks to the improved competitiveness . But we can now see that the long-term outlook for Spain (potential growth, weight of industry, structural unemployment) has not improved, which is very worrying.