The inexorable rise in the euro zone’s structural heterogeneity

Euro-zone countries are now faced with: The impossibility of leaving the euro, given the very large size of gross external debt s in euros; The absence of capital mobility between the euro-zone countries; The inability to correct a cost-competitiveness shortfall (internal devaluations are very costly, fiscal devaluations are too small). If a euro-zone country is struggling with its cost competitiveness or due to weak investment, there are no available mechanisms to correct these problems: the country cannot leave the euro and devalue; it does not receive any capital from the other euro-zone countries to boost investment ; it cannot improve its cost competitiveness: the downward spiral in th is country’s income (for instance Italy) cannot be stopped.