ECONOMY

Almunia says Greek wage rises too high for economy

BRUSSELS – Greek inflation has averaged about 3.5 percent since 2001, 1.25 percent above the eurozone average, largely due to wage rises above productivity increases, Economic and Monetary Affairs Commissioner Joaquin Almunia said yesterday. Replying to a question by Greek Synaspismos Left Coalition Euro-MP Dimitris Papadimoulis, Almunia said this appeared to be above what could be shouldered by an economy with a competition problem. «The nominal increase in wages in this period was in excess of the rise in productivity, causing unit labor costs to rise at a rate double that in the eurozone,» he said. However, wages are only one side of the inflation coin, and Almunia noted that the government has announced «structural reforms in the product markets» as one of the main challenges» in its economic policy, in order to bolster competition. The European Commission has urged that «such measures have to be accompanied by the full implementation of legislation on the single market,» which aims precisely to strengthen competition and «is a key sector in which Greece’s performance remains among the least satisfactory in the EU.» The domain of public procurement tenders also remains «problematic,» according to the Commission, with very high commission costs. In any economy, a lack of competition leads to price rises (and to increases in corporate profits), which, in turn, create pressures for wage rises, in the manner of a vicious circle which «can deteriorate or be moderated,» depending on the existence and form of collective wage bargaining – regarding which the Commission has long expressed its disagreement. Regarding the Greek economy in particular, Almunia adds action is needed to boost competition in the sector of professional services, especially those still operating as «closed-shops.»