La nouvelle désinflation compétitive européenne

Germany?s current economic strategy is a variant of the so-called ?competitive disinflation? that France pursued in the late 1980s?. It is but one in a large array of non-cooperative strategies that EU countries have individually chosen to implement since the beginning of the monetary unification process, for lack of adequate common institutions that could foster coordination. Because competitive devaluations are no longer possible within the Euro zone, member states resort to various modes of competitive disinflation (wage moderation, tax competition, social dumping, etc.). The question raised by Germany?s strategy, that mimics that of smaller countries, is its effectiveness: we show that the composition of German economic growth is very different from that of smaller European countries. We conclude by discussing to hypotheses that may motivate Germany?s current policy choices. JEL Codes: E01, F43, O52.