Report
France and Italy have not understood the operating rule of a currency area
Countries in a currency area have to keep production costs at the level that correspond s to their level of product sophistication, since there cannot be any devaluation. This is what Germany is doing (high costs and level of product so phistication) and also Spain (low costs and level of product sophistication), but not France and Italy (high costs and low level of product sophistication), which explains these two countries’ market share losses. Accordingly, France and Italy will not enjoy an economic recovery as long as there is a gap between production costs and the level of product sophistication. As improvement s in the level of product sophistication and in productivity gains are slow and uncertain processes, it is to be feared that in the short and medium term , only wage restraint will be able to rebalance production costs and the level of product sophistication in France and Italy .
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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