Report
Patrick Artus

In which large euro-zone countries did entry into the euro coincide with the start of a period of stagnation in purchasing power and why?

Public opinion in euro-zone countries sometimes attributes stagnant purchasing power to its country’s membership of the euro zone . Did some large euro-zone countries’ entry into the euro coincide with a significant slowdown in wage earners’ purchasing power? This is the case in Spain and Italy. What mechanisms might lead entry into the euro to curb real wages? Such mechanisms could be: An internal devaluation (need to reduce labour costs to improve cost competitiveness). This has been the case in Spain since 2008; A decline in productivity gains related to a decline in investment due to a more restrictive fiscal policy and an increase in the corporate tax burden. This is the case in Italy; Considerable market share losses related to the impossibility of improving cost competitiveness by devaluing the exchange rate. This is the case in Italy.
Provider
Natixis
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.

 

Analysts
Patrick Artus

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