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His claim that “unit labour costs did not lead to the higher current account deficits” is nonsense. In the decade after Greece joined the EZ, Greeks awarded themselves three times the wage increases (in terms of Euros) that the Germans did. That’s bound to have had an effect of the competitiveness of Greek exports (and import substituting activities).
But that’s not to say it’s all Greece’s fault. I.e. German wage increases were a bit stingy given that their inflation in that decade was about 1.5% rather than the target 2%. Plus there are obviously factors other than wage increases that influence competitiveness: e.g. the “technology and innovation” mentioned in Syll’s quote.
But to repeat, the idea that wage increases have NO EFFECT on competitiveness is nonsense.
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His claim that “unit labour costs did not lead to the higher current account deficits” is nonsense. In the decade after Greece joined the EZ, Greeks awarded themselves three times the wage increases (in terms of Euros) that the Germans did. That’s bound to have had an effect of the competitiveness of Greek exports (and import substituting activities).
But that’s not to say it’s all Greece’s fault. I.e. German wage increases were a bit stingy given that their inflation in that decade was about 1.5% rather than the target 2%. Plus there are obviously factors other than wage increases that influence competitiveness: e.g. the “technology and innovation” mentioned in Syll’s quote.
But to repeat, the idea that wage increases have NO EFFECT on competitiveness is nonsense.
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