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The crisis in the European Monetary Union cannot be attributed simply to the growth of government deficits in its member countries. Current account imbalances between eurozone members and the resulting accumulation of external private and public credit and debt appear to be further causes of instability. The gap between unit labor costs seems to be one of the determinants of trade imbalances. germany, in particular, despite its current account surplus, has adopted a policy of relative wage deflation in recent years that has increased this gap. The adoption of a "European wage standard" may prompt countries with surpluses to generate higher growth in nominal wages, prices, and wage shares, thus helping to restore the balance in trade and safeguard European unity.

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