No one knows how to correct competitiveness gaps in a currency area

In a currency area, cost competitiveness gaps between the countries cannot be corrected through actual devaluations or revaluations ; they have to be corrected through internal devaluations or appreciations (revaluations) affecting labour costs. But unfortunately, it is not possible to rely on internal devaluations or revaluations: In a country in trouble, the internal devaluation leads to a fall in unit labour costs and inflation; but as interest rates are determined at the currency area level, the internal devaluation leads to a rise in real interest rates and in debt ratios, and is therefore costly and dangerous; If an internal devaluation cannot be used, one could then consider using an internal appreciation (a revaluation) for the countries in the currency area whose competitiveness is strong. But companies in these countries have no reason to accept a deterioration in their competitiveness, which would also affect their competitiveness against the rest of the world. If neither an internal devaluation nor an internal appreciation can be used to correct cost competitiveness gaps in a currency area, the only solution would be to prevent these gaps from appearing, which would be an incentive to harmonise the functioning of labour markets (another task that unfortunately is very difficult). We will use the euro zone as an example of all of the above.