Commission report on surveillance of intra-euro-area competitiveness and imbalances

The first decade of Economic and Monetary Union (EMU) has witnessed steady competitiveness divergence between euro-area Member States together with the emergence of large differences in current account positions. These trends are a cause of concern both for individual Member States and for the functioning of EMU and have been, to a large extent, further exacerbated by the economic crisis.

The situation is particularly pressing in Member States with high public debt, large current account deficits and large competitiveness losses, but a coordinated effort by both current-account deficit and current-account surplus countries would enable the euro area as a whole to adjust more smoothly.

The Eurogroup discussed the issue repeatedly in recent years and agreed in 2008 to initiate a regular review of competitiveness divergences and macroeconomic imbalances within the euro area. The present report is part of the European Commission's input to the review carried out by the Eurogroup in 2010. It provides a comprehensive assessment of the external performance of euro area Member States since the launch of the euroin 1999, focusing in particular on the impact of the global financial and economic crisis. It also reviews possible policy responses.

The competitiveness assessment is broad-based, drawing on the examination of a wide range of indicators. It also includes a review of the domestic imbalances that underlie changes in competitive positions, including excessive growth in private-sector credit and asset prices in some Member States.

>> Report. Surveillance of intra-euro-area competitiveness and imbalances (in: European Economy 1/2010)

The report is composed of three parts:

Part I  - Horizontal analysis - Trends in competitiveness and impact of the crisis

This part presents a horizontal perspective with a cross-country review of developments in price and cost competitiveness and external performance. It focuses on recent developments and the impact of the crisis, setting them against the more medium-term trends observed since the launch of the euro. It also analyses changes in the drivers of competitiveness and external performance and in the underlying domestic imbalances. A section is devoted to the implications of the crisis for the competitiveness adjustment channel in the euro area.

Part II - Overall assessment and policy implications

This part provides an overall assessment of competitiveness developments in the euro area and discusses policy implications. It proposes a set of policy measures at the macro- and microeconomic level to improve competitiveness adjustment within the euro area.

Part III - Competitiveness developments in euro area countries

This part presents a country-specific analysis on competitiveness developments for each of the 16 individual euro-area Member States. They underpin the overall competitiveness assessment and policy analysis presented in the report by an extensive and detailed expertise of the economies and institutions of the countries concerned.