If “true” variability – or at any rate that which is relevant to the markets – is reflected better in items marked-to-market than valued at cost, then the banks will be called on to take precautions in managing, insuring against and sustaining risks. Prudential supervision itself will focus more sharply on the financial institutions supervised.
At the same time, it is worth noting that both currency areas include regions with persistently above or below average unit labour cost growth. Again leaving aside the countries to join the euro area most recently, here, Greece, Portugal and Ireland, in particular, had progressively lost competitiveness vis-à-vis their main trading partners in the euro area. They are now engaging in catching-up, adjustment strategies.