France and Italy: Politicians and public opinion will have to accept the idea that cost competitiveness is important

In France and Italy, public opinion demands an improvement in purchasing power and pay rises. A general pay rise (not financed by the state) would adversely affect industrial cost competitiveness, both directly and via industry's consu mption of services. Now, F rance and Italy have a problem of cost competitiveness given their level of industrial sophistication: raising wages significantly before industry has had time to move up the value chain would exacerbate the market share losses and the deindustrialisation. The existence of this constraint will have to be accepted.