The cases often presented as the evidence of effectiveness of the internal devaluation

This chapter discusses cases which some observers believe demonstrate the effectiveness of the policy of internal devaluation: labour market reforms in Germany in 2003–2005; the adjustment of Latvia after 2008 (which is judged against the adjustment of Iceland); the adjustment of Ireland, also after 2008; the exceptional improvement in the current account balance in Spain after 2007 (which is judged against a comparable improvement in South Korea after 1997); and the observed phenomena of expansionary effects of fiscal tightening. The authors argue that none of those cases justifies hopes that a policy of internal devaluation can be an effective solution in restoring international competitiveness in the eurozone countries.