Very often the same set of countries are characterised by developments in key economic variables that are systematically either above or below the euro area average. This may suggest that the underlying adjustment mechanisms in the euro area economies are not functioning as smoothly or swiftly as they should.
If the persistence of higher than average inflation and stronger than average unit labour cost growth reflects structural rigidities in a country’s economy and the implementation of inappropriate policies, this is a matter of concern because of the likely adverse effects on competitiveness, longterm growth and employment creation.