Internal devaluation

Internal devaluation is an economic and social policy option whose aim is to restore the international competitiveness of some country mainly by reducing its labour costs – either wages or the indirect costs of employers. Sometimes internal devaluation is considered as alternative to 'standard' external devaluation, although social implications and speed of economic recovery can significantly differ between the two options.

Internal devaluation was first considered during the Sweden economic crisis during the 1990s and Finland's accession to the European Union in 1995. Internal devaluation gained popularity during the economic recession of 2008–2010 when several countries pursued such policies with aim to restore competitiveness and to balance national budgets.

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