Friday March 27, 2015 Search
Weather | Athens
14o C
09o C
News
Business
Comment
Life
Sports
Community
Survival Guide
Greek Edition
Structural reforms preferable to wage cuts, IMF experts say

Adjustment programs in debt-hit euro area countries would run more smoothly if governments implemented structural reforms to boost productivity, according to a staff discussion note published by the International Monetary Fund (IMF) on Tuesday.

The document – which is titled "Deficit countries: Progress, challenges, and policies" and which is not an official IMF report – stressed that achieving internal devaluation in the economies of the periphery (Greece, Ireland, Portugal and Spain) “hinges on depreciating the real effective exchange rate through lowering nominal wage growth and/or improving productivity relative to trading partners.”

The report – prepared by Thierry Tressel, Shengzu Wang, Joong Shik Kang and Jay Shambaugh – noted that past experience indicates that achieving internal devaluations can be a long and painful process in an environment with wage rigidities. Similarly, internal devaluations can be difficult when trading partners’ inflation is low and may exacerbate debt overhang problems.

IMF experts said structural reforms, instead of additional wage cuts, were necessary to remedy the situation.

“While productivity improvements would have the same effect on inflation as nominal wages cuts, they appear more desirable in the medium term as they boost demand,” they said.

Debt-hit countries have so far combined relative price adjustments, achieved mainly by compression of internal demand and labor shedding, and structural change, the note said. Progress remains limited as although exports have rebounded, manufacturing sectors “typically remain smaller than before the crisis,” it said

“The large current account deficits in Greece, Ireland, Portugal, and Spain have shrunk drastically or turned into surpluses largely because imports and potential growth have slowed down drastically relative to precrisis trends.”

Authors said that macroeconomic policies, structural reforms, and policies to complete eurozone integration were critical to advance adjustment.

In the short term, the authors said, supportive macroeconomic policies “would help support domestic demand and facilitate relative price adjustments.”

In the medium run, further structural reforms in product and labor markets are needed to raise productivity and lift potential output growth.

“In the future, elements of a Fiscal Union would also help facilitate adjustment across member states,” the note said.

ekathimerini.com , Wednesday Jul 23, 2014 (11:19)  
Austrian Finmin sees crisis of confidence in Greece
Bundesbank´s Weidmann says euro zone debt in ´danger zone,´ opposes more aid for Greece
Greek future as trade hub in limbo amid Syriza split on railways
Bank deposits lost another 7.6 billion euros last month
Berlin says has no exact information about Greek reforms
The German government has no details about the list of reforms that Greece is due to present by Monday in the hope of avoiding bankruptcy, a spokeswoman for the German finance ministry said....
Greek gov´t denies finance minister Varoufakis to resign [Update]
Greece's outspoken Finance Minister Yanis Varoufakis is not planning to resign, two Greek government officials said on Friday, denying a report in Germany's Bild newspaper. "None of this is ...
Inside News
BASKETBALL
All is well that ends well for Olympiakos
Young Ioannis Papapetrou helped Olympiakos stage an impressive last-quarter performance to beat visiting Efes Anadolu 86-75 on Thursday and bring its Euroleague losing streak to an end. The ...
BASKETBALL
Reds survive KAO Dramas scare in Piraeus
KAO Dramas gave depleted Olympiakos a scare at the Peace and Friendship Stadium on Monday, but the league leaders eventually managed to get their 20th win in 21 games. The Reds won by 10 (72...
Inside Sports
COMMENTARY
Time to get moving
More than two months have passed since the elections and the government has to stop running around in circles and adopt a program of specific reforms, with detailed calculations as to their ...
EDITORIAL
The same old story
One of those infamously bad practices that the political system has been accused of for years is being propagated by the new government today, as it is appointing party cadres and politician...
Inside Comment
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
 RECENT NEWS
1. Austrian Finmin sees crisis of confidence in Greece
2. Berlin says has no exact information about Greek reforms
3. Greek gov´t denies finance minister Varoufakis to resign [Update]
4. Bundesbank´s Weidmann says euro zone debt in ´danger zone,´ opposes more aid for Greece
5. Clocks go forward one hour on Sunday
6. Greek future as trade hub in limbo amid Syriza split on railways
more news
Today
This Week
1. New Democracy's political council convenes to decide line opposite gov't
2. Greek future as trade hub in limbo amid Syriza split on railways
3. Bundesbank's Weidmann says euro zone debt in 'danger zone,' opposes more aid for Greece
4. Clocks go forward one hour on Sunday
5. Greek gov't denies finance minister Varoufakis to resign [Update]
6. Berlin says has no exact information about Greek reforms
Today
This Week
1. Next Monday is D-Day for state funds
2. Total victory is unattainable
3. EU asks Greece for more reforms to speed talks on bailout
4. PM faces Merkel amid race to detail reforms
5. Some more equal than others
6. New book by ex-US diplomat delves deeper into the recesses of Greek terrorism
   Find us ...
  ... on
Twitter
     ... on Facebook   
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright © 2015, H KAΘHMEPINH All Rights Reserved.