Increases in labour compensation in some countries, driven in most cases by high public sector wage increases, exceeded productivity gains by a significant margin, leading to increases in unit labour costs in excess of the euro area average and a gradual erosion of competitiveness (see Slide 3, ULC indices).
At the same time, growth in the unregulated financial sector and unsustainably strong domestic demand growth, coupled in some cases with excessive credit growth and large and sustained increases in real estate prices, resulted in large current account deficits (see Slide 4, CA deficits) and high levels of public and private debt (see Slide 5, public debt ratios).