> Trying to understand - you mean it is not possible for other Euro countries (who also use Euro as their currency)? But does it really matter for them?
By way of example, Italy used to devalue the currency from time to time to give a bit of a boost to exports. This, for better or worse, is no longer possible.
Still, I am not sure if in the end, such measures are only "snake oil". Theoretically it should all cancel out eventually. For example if you devalue the currency, your people become poorer. What is the difference to just paying them lower wages and thus selling your stuff for less Euros? Seems to me it is mostly psychological: devaluing the currency can be done sneakily behind the populations back (printing more money or whatever), whereas lowering wages would get noticed.
Personally I am always for more transparency, so maybe it is a good thing if the sneaky way to conduct economics goes away.
> For example if you devalue the currency, your people become poorer. What is the difference to just paying them lower wages and thus selling your stuff for less Euros?
One important difference is in domestic contracts. Let's say you are an employee in a country that uses # as currency, and your current monthly wage is 1000#. You pay 500# of that every month for fixed contracts such as rent, health insurance, electricity, telephony, etc.
Now you are faced with two possible scenarios: A) There is CPI inflation of 10%. B) Your wages are cut by 10%.
In both scenarios, your nominal wages are down to 900#. But when you look at it more closely, there is a significant difference.
In scenario A, you still receive (nominal) 1000#. Of those, you pay 500# to your fixed contracts, and you use the remaining 500# for consumption goods, whose real value compared to before is now only 450#.
In scenario B, you receive (nominal) 900#. Of those, you pay 500# to your fixed contracts, and you have 400# remaining to buy consumption goods.
Clearly, inflation (scenario A) is better for you. Devaluation of the currency by 10% would be even better, because currency devaluation rarely punches through entirely to consumer prices: only imported goods are affected directly, after all.
Now you could argue that in the long run, those fixed contracts like rent will also be adjusted. But there is a huge difference in pressure and thus power between the scenarios: when your wages are decreased, you are immediately worse off as an employee, and it is up to you personally to try to get a better deal on the rent, forcing the landlord to decrease their rent in turn. In the case of inflation, however, it is up to the landlord to raise rents, something for which there are often significant legal hurdles.
Most employees probably don't think these scenarios through, but the gut reflex ends up being correct in this case: for employees, currency devaluation is better than nominal wage reduction.
(Of course, everything I've said changes for somebody who has significant nominal assets; but then, it would probably be incorrect to classify them as an employee.)
OK, point taken, surely it is easier form an organizational point of view.
But then another question: suppose the governments wants to make it's goods/exports cheaper, maybe there would still be lots of other possibilities, like changing/lowering taxes. Obviously still more complicated than just printing more money, but still.
Import duty is the other solution, but that's illegal within the EU - the whole point is it's an economic union.
Theoretically it should be balanced out by workers moving to more prosperous parts of Europe (where there are more jobs) - and the treaties do specify free movement of labour. I don't know whether we've yet seen an influx of Greek workers moving to Germany, though.
There were lots of Germans moving to Spain and other places, when they still boomed. Lots of them are coming back. So in a sense you already see an influx of workers from Greece to Germany, it's just that they are German.
Yes, I think there are problems with devaluations, and one of the positives of the crisis is that Italy is finally starting to grapple with some structural reforms, timid though they may be. Stores may finally open on Sundays!
Also, it looks like http://SrlFacile.org made it in front of the right people, as the recent liberalization package includes a simplified form of limited liability company which requires no 'social capital' and no notary to form.
The psychological thing isn't something to discount too lightly though: wages tend to be 'sticky' in that it's very difficult, generally, to get people to take lower wages.
Shops opening on Sundays is just an example - there are a number of reforms under way. Germany could use some liberalization of its own; it doesn't have all that much more economic freedom than Italy, it just functions significantly better.
By way of example, Italy used to devalue the currency from time to time to give a bit of a boost to exports. This, for better or worse, is no longer possible.