However, progress has also been uneven across financial markets. Two main conclusions stand out in this regard: First, integration is typically more advanced in those markets that are closer to the single monetary policy. Second, it also depends on the degree of integration of the related market infrastructures.
Over time, competitiveness eroded. Euro-wide price stability masked large differences in national inflation rates. Unit labour costs in peripheral countries shot up relative to the core economies, particularly Germany. The resulting deterioration in competitiveness has made the continuation of past trends unsustainable (Chart 3). Growth models across Europe must radically change. It’s the balance of payments, stupid!