Competitiveness adjustment in struggling southern euro-area members requires persistently lower inflation than in major … trading partners, but low inflation worsens public debt sustainability. When average euro-area inflation undershoots the two … baseline scenario, the projected public debt ratio reduction in Italy and Spain is too slow and does not meet the European …

) aggregate. We identify reasonable and stable money demand relationships for Germany, France and Spain as well as the EMU-4 … countryspecific measures, particularly since the start of EMU, and is useful to predict country-specific inflation. However, it … generally does not encompass country-specific money overhang measures as predictors of inflation. Hence, aggregate money …