Competitiveness adjustments will always be asymmetrical in the euro zone

In an ideal world, when cost competitiveness begins to diverge between euro-zone countries, the countries whose competitiveness is deteriorating should reduce their labour costs (carry out an internal devaluation) and the countries whose competitiveness is strong should increase their labour costs (carry out an internal appreciation). But this symmetrical adjustment does not happen - beyond what results spontaneously from wage formation ( the Phillips curve effect ), which is much too small today in the euro zone to re balance countries ’ cost-competitiveness levels. The adjustment remains asymmetrical, with discretionary internal devaluations in the struggling countries (labour market flexibilisation, etc.) and very little internal appreciation in the countries with decent competitiveness. It is understandable that the adjustment is asymmetrical: If a country has poor competitiveness, it loses market shares and jobs and therefore has an incentive to restore its competitiveness; If a country has strong competitiveness, it gains market shares and jobs and fails to see why it should arrest these positive trends by taking measures to increase its labour costs. If the Phillips curve effect s are too weak to re balance euro-zone countries’ cost-competitiveness levels, then only the struggling countries will take discretionary measures to correct their competitiveness.