Widespread demand for more expansionary fiscal and wage policies in the euro zone (excluding Germany). What consequences?

Recent political and social developments in Italy and France show widespread demand in the euro zone ( apart from Germany and a few Northern European countries) for more expansionary fiscal and wage policies , aimed at increas ing households ’ standard of living. What are we to make of and what could be the consequences of these demands? Given the situation of excess savings in the euro zone and the preference for government bonds, we could imagine that it would be easy to finance a higher fiscal deficit. The example of Italy shows that this is not the case, especially because of the lack of capital mobility between euro-zone countries, and there is therefore probably a quite low limit to the increase in fiscal deficits. As can be seen currently, European investors can switch into government bonds issued by Germany and the small euro-zone countries, non-European investors can sell euro-zone bonds; If wages rise faster in France or Italy, the impacts on industry, investment and employment would be very negative due to these countries’ cost competitiveness and profitability disadvantage given their level of product sophistication . If the wage increases were also applied in the other euro-zone countries (Spain, Germany), the danger would be reduced, but there would still be an impact on low-skilled employment, which is very sensitive to unskilled labour costs. There is probably a small fiscal leeway in the countries deemed to be safe at present (such as France), and very limited margin to increase wages.