Higher domestic demand led to above-average inflation in the respective countries, while nominal interest rates hardly differed across the euro area, causing real interest rates to fall even further in the countries concerned. At the same time, higher demand caused wages to rise as well, which pushed the real exchange rate up and reduced price competitiveness.
European Central Bank: Press conference – introductory statement Introductory statement by Mr Jean-Claude Trichet, President of the European Central Bank and Mr Lucas Papademos, Vice-President of the European Central Bank, Frankfurt am Main, 5 July 2007. *  *  *  Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to today’s press conference.