Euro zone: There is no point longing for the good old days when it was possible to devalue. In contemporary economies, a devaluation has a very negative impact on the economy

The euro-zone countries that are hit by a deterioration in their cost competitiveness can no longer correct it by using a devaluation. Nowadays, they can either refrain from correcting this deterioration (France and Italy), or they can use an internal devaluation (a squeezing of wage costs, Germany and Spain). Some in the euro zone regret the fact that a devaluation can no longer be used. But we have to realise that (as shown by the recent examples of the United Kingdom and Japan) in contemporary economies, while a devaluation restores exports and industry, it considerably weakens domestic demand (via the effect of the rise in import prices) and has a significant negative impact on overall activity. So nowadays, there is no available inexpensive way to restore cost competitiveness .