After euro area entry, fiscal discipline was relaxed and during the last five years the fiscal deficit has, in fact, worsened. Only this year has it been budgeted to fall below 3% of GDP, while continuous efforts will have to be maintained to reach a balanced position, as required by the EU.
BIS Review 55/2006  1  Moreover, the euphoria after euro area entry prompted a '' money illusion '' with labour unions demanding and obtaining high nominal wage increases, regardless of the impact on real incomes and unemployment, as a result of the the loss of external competitiveness.