Third, less than 2% but close to 2% over the medium term – namely the level of medium-term inflation that is ensured as an average in the euro area by the ECB – is the right benchmark to use for all countries to calculate competitiveness indicators in real terms. Hence, one must not be misled into price-wage spirals by temporary inflation differentials. 4.
Fourth, the current account balance is an important summary indicator that may signal losses of competitiveness and emerging imbalances. As a result, policymakers should monitor this balance closely, and especially the related external debt accumulation. 5. And finally, sound public finances are a pre-condition competitiveness. This is yet a further reason for fiscal solidity.