European competitiveness

By Carolyn Payne,2015-04-15 03:34
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European competitiveness

    European competitiveness

    It is said that every at a meeting of the European commission, the European central bank President, will show a dynamic picture of the euro zone's 16 members wages.The chart shows, in the past ten years of development and changes in those troubled countries (such as Greece, Portugal and Spain) competitiveness has fallen by about 20% relative to Germany.In other words, since 1999, the German wage rise of 20% less than in southern Europe.

    The answer is obvious.Due to declining competitiveness, to join the euro zone's southern European countries cut their wages must be balanced.

    Considering the above factors, the eu President rompuy lead a fundamental reform on the economic policy framework of the eu.In the reform of meeting for the first time put forward the concept of competitiveness index, if the European Union found data deviation, will force member states to take remedial action ".

    This method made the directional errors.Competitiveness is usually measured in unit labor, is a relative concept.Promoting a country's competitiveness in fact is a fall in another country.If

    you want to improve the competitiveness of some countries (Spain, Greece) requires other countries to cooperate, such as Germany) recession.

    Adjustment process, often is to improve the labor wages in low cost countries, rather than lower Labour costs to the country's income.Official a reflection of this is that no country should be forced to raise wages.If structural reforms to improve the productivity, everyone will benefit.

    This, of course, is true, but it has not been able to solve the fundamental problem - a country's relative unit labor costs can drop with the rise of other countries.

    Even assuming that the eurozone is how to allocate the competitive relationship agreement, but these countries are not planned economies.If the market resulting in a decline in the wage of the private enterprises, the government also not to intervene.

    Of course, the government can cut public-sector wages.This is now the government to take measures to Greece and Spain.But, there is no evidence to suggest that the public sector wage changes have any effect on wages for private enterprises. The productivity effect how?Even if the government can rapidly improve productivity through structural adjustment,

    productivity also can't say that can enhance competitiveness. In fact, the eu internal counter examples abound.Some of the highest labor productivity often lose competitiveness (e.g., Ireland).

    Why is this?High productivity will naturally lead to falling unit labor costs, but also will be offset by higher wages.Productivity growth than wage growth in general.

    Really the question is, what salary to order?National statistics show that in the past decade, the increase of wages are increasing in the main and domestic related, such as Spain and Greece.

    Demand of wages, or demand wage?A big reduce

    unemployment, the vast majority of the competitiveness of the southern European countries will decline.Reason is not the lack of structural reforms or unreasonable demands of the union.But due to the easy credit (such as Greece) and infrastructure (such as Spain and Ireland) to expand domestic demand.The transition of consumption and infrastructure lead to labor shortages, especially protected services, thus promote higher wages.

    If excessive domestic demand is a problem, we should like to deal with.International capital markets have been tightening

    lending to these countries.Southern European countries fiscal tightening will sharply slowing domestic demand.If the Labour market is fluid, will lead to wage cut.In fact, this is the key point: the Labour market can be adjusted freely.

    Of course, this adjustment will be relatively easy, even in Germany pay cut.But if Germany to reduce unemployment, past the wage increase is unlikely to happen.

    The idea of the view that the government must increase "competitiveness" lead to excessive economic policy adjustment, the government and the eu have been trying to influence of the private enterprise wages, for this crisis may be effective, but if domestic demand is different, the difference wouldn't be on competitiveness.

    The structural reform of course useful.But to boost productivity need quite a long time, but not necessarily can improve competitiveness.Southern European countries need right now is to cut the plight of domestic demand in response to no foreign capital input.Only after a period of time after reaching new equilibrium, the Labour market to normal operation.

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