Great Graphic: European Unit Labor Costs

This Great Graphic comes from the FT Alphaville.  It was taken from SocGen's Cross Asset Research/Economics group and shows the development of unit labor costs in the euro area since 2000.  It shows improvement in the competitiveness of Greece, Portugal, Ireland and Spain.  

However, Italy has continued to move in the wrong direction.   That Italy is still experiencing rising unit labor costs may not be that surprising, even if disappointing.  Most interestingly, French unit labor costs are also continuing to rise.   We don't expect the European debt crisis to be over until it reaches France in some fashion.

In the context of debt and deficits and competitiveness, France is arguably more a Mediterranean county than a Northern European country.   Unit labor costs in the euro area as a whole are rising and this is appears to be driven by Germany and France.   Germany remains highly competitive; France not so much. 

One of the issues brought out in Soc Gen's research, drawing from Eurostat data, is that the improvement in the periphery unit labor costs appear to be driven from what Eurostat calls "non-business" wages.  Non-business includes education, health services and public administration.  This means increased competitiveness can be traced to a large extent to civil service reform.  This is one of France's Achilles heels, so to speak.