“Italy needs lots of deflation …”

Been quite a while since I mentioned the Global Macro Monitor blog. Its a must read, for so many reasons. Here they are commenting on Italy, nailing the problem so many of these Euro countries have:

Italy needs lots of deflation relative to other countries to become competitive and doesn’t have the ability to adjust relative prices through the exchange rate without an independent currency.

http://macromon.wordpress.com/2011/12/04/italys-unions-not-buying-the-full-monti/

Of course, an internal devaluation is so much more difficult than a depreciation of the exchange rate.

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