ECB Demands wage cuts, Investors fear deeper recession

Aug. 9, 2012 - PRLog -- The European Central Bank (ECB) is expected from the crisis countries in the monetary union, further significant reductions in wages and incomes. In order to increase their competitiveness, is a "further significant reduction in unit labor costs and excessive profit margins," necessary, according to a new analysis in the ECB's Monthly Bulletin. In the years before the crisis were the wages in the euro peripherals much faster than average and far above the increased productivity. This was much too late to correct, criticize the ECB.

Especially in Spain and Greece is now expecting a sharp decline in compensation of employees. Furthermore, the ECB recommends the "program" countries, the EU's assistance to obtain credit, an easing of employment protection, the elimination of wage indexation and the lowering of minimum wages. Some of these structural reforms have already been started. Ireland is mentioned in the ECB report praised as an exception, because there is greater wage flexibility. In the other countries of the previous loss of competitiveness will slowly catch up. The increase in average labor productivity but also resultiere of job cuts in unproductive sectors. The productivity should also be increased by more innovations. For this purpose, the ECB recommends spending more on education, research and development.

Only Portugal has the primary budget surplus
Overall, the program certifies the ECB countries "some progress" but still had considerable work is needed. Although the current accounts of countries that were heavily in deficit at the onset of the crisis, have now improved. In Greece, the deficit in 2008 because it is much more imported than exported, up to 17 percent of GDP last year, but still more than 10 percent. Only next year will it shrink to about 6 percent. Portugal and Spain have their deficits since the beginning of the crisis has halved. Only Ireland has made the turn into a surplus. In other countries, although there was some increase in exports and a weaker import development, but especially in Greece, Portugal and Cyprus, it's not enough, according to the ECB.