ECB official warns against wage rises

Greece risks falling even further behind its European Union partners if it follows a lax wages policy, warned Otmar Issing, the European Central Bank’s chief economist and member of its Executive Committee. In an interview with the Sunday edition of Kathimerini, Issing particularly warned against the urge to converge wages, arguing that higher wages that were not backed up by a rise in productivity would have an adverse effect on unemployment. «The view that the same job should be paid the same (in different countries) is misleading, especially within the framework of the monetary union, where we can’t use the tool of currency exchange. If a country wants convergence in this way, it must bear the consequences,» Issing said. Issing’s comments, although not directly aimed at Greece, cut directly into the debate currently raised by Greek unions, who have embraced «wage convergence» as their slogan. One of these unions is the Union of Athens Journalists, which has called for a 48-hour strike for tomorrow and Thursday. This is the second strike within less than the month – it was preceded by a 24-hour strike on March 6 – and the first two-day strike in almost two decades. The General Confederation of Greek Labor (GSEE), currently in wage bargaining talks with employer organizations, has also come out enthusiastically for wage convergence. Moreover, in imitation of the French example, it wants a reduction of the working week with no corresponding pay cuts, but without the freeze on wage rises and the increased flexibility in working hours imposed in France. «As long as the Greek average inflation rate exceeds the average eurozone level, there is the danger that it will affect the country’s competitiveness. This is a worrying development,» Issing said. Greece’s Harmonized Index of Consumer Prices (HICP) fell to 3.8 percent in February after spiking to 4.8 percent in January, but it is still almost double that of the eurozone’s average. Unemployment, once one of Europe’s lowest – although Greece’s statistics on that issue were always notoriously unreliable – is now the highest after Spain’s. The rigidity of unions and the government’s propensity to satisfy most of these demands do not augur well in the fight against either unemployment or inflation.

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