Mario Draghi, head of European Central Bank found the solution to to production, especially in the bailout countries of the Euro Zone. “Urgent need to improve competitiveness and have labour forces work for dumping prices through further lowering the minimum wages” is the magic formula proposed by the ECB-chief. In the monthly report of ECB, released on August 9th, 2012, we read among others:
“At the same time, structural reforms are as essential as fiscal consolidation efforts and the measures to repair the financial sector. Some progress has also been made in this area. For example, unit labour costs and current account developments have started to undergo a correction process in most of the countries strongly affected by the crisis.
However, further reform measures need to be implemented swiftly and decisively. Product market reforms to foster competitiveness and the creation of efficient and flexible labour markets are preconditions for the unwinding of existing imbalances and the achievement of robust, sustainable growth. It is now crucial that Member States implement their country-specific recommendations with determination.” (Full article ECB)
Mario Draghi wants to further cut the minimum wages especially in Greece and Spain but also in Portugal and Ireland, EZ-member countries under bailout mechanism. Although some progress have been made,
“Significant further efforts to improve competitiveness, reduce unemployment, particularly among young people exceeds 40% in Greece and Spain, and the sustainability of public finances are needed.
Labour costs and excessive profit margins have to be cut.
“In order to achieve this goal, states should enhance flexibility in the process of determining fees, to further reduce the minimum wage and to allow negotiations on wage setting at company level.”
The report emphasizes that “competitiveness should be improved by a permanent increase in labor productivity through privatization, innovative measures in production processes and develop new products, but also measures to improve the skills of workers.”
In February 2012, minimum wages in Greece suffered sharp decreases of -22% and -32% (for youth below 25 years old).
- Minimum wages dropped from 751 euro gross down to 586 euro gross (489 net) for those over 25 years old.
- For younger employees (below 25 years old) minimum wage dropped down to 510 euro gross (440 net).
- Respectively, the unemployment allowance dropped from 460 euro down to 359 euro.
In reality things are much worse: Especially young Greeks get a job for maximum 400 euro and thus without insurance. Part-timers get no more than 150-200 euro, no insurance.
According to latest data, unemployment hit a new record with 23.1% in May 2012. Among the youth the rate is horrifying: 54.9% of the youth is without job.
PS Can you imagine? You work full time 8-10 hours per day and get less than 400 euro per month? What are they up to? To turn the PIIGS into EU Chinas and Indias? It looks so. If only the cost of living could drop as well. But it doesn’t.