Competitiveness in the European market: a comparative analysis of the Eurozone periphery and the non-Eurozone periphery

Abstract

Competitiveness, a crucial factor determining the trade capabilities of national economies, becomes increasingly significant as the global economy evolves towards greater integration. This research compares different strategies applied to enhance competitiveness of the European markets within the global landscape. It employs an innovative methodology to analyse the array of instruments utilised to attain competitiveness: (i) absolute competitiveness strategies, which entail price adjustments on the components of production; and (ii) relative competitiveness strategies, typically, exchange rate appreciation and depreciation mechanisms. This methodology is applied to two distinct groups of countries within the European Union (EU): the Eurozone periphery (Greece, Ireland, and Portugal), which uses the euro as a single currency and adheres to a strict monetary framework; and the non-Eurozone periphery (Czechia, Hungary, and Poland), which possesses the autonomy to modify their currency and monetary policies independently. The paper demonstrates that the Eurozone periphery has refrained from relative competitiveness strategies and deliberately adopted absolute competitiveness strategies, resulting in specific implications for the labour market. The non-Eurozone periphery has effectively used both absolute and relative competitiveness strategies, the former remaining comparatively moderate with limited impacts on the labour market and the latter being mostly dominant. Based on the comparison of key economic indicators of competitiveness, the paper asserts that the presence of relative competitiveness strategies mitigates the pressure on absolute competitiveness strategies, whereas their absence intensifies the reliance on absolute competitiveness strategies.