The International Monetary Fund΄s chief economist said late Monday that Greece needs to cut wages to boost competitiveness and pull the country out of its economic quagmire. Greece “needs a dramatic decrease in its debt. That΄s the subject of negotiations,” Olivier Blanchard said, Dow Jones Newswires reported.“But that΄s only half of what it needs, and maybe in a way it΄s the easier half. “The other half is competitiveness…Either you basically increase productivity growth a lot and quickly, and you keep wage growth moderate, or you decrease wages,” he said.
“There is basically no way around that.”
Blanchard was speaking in Washington at the Carnegie Endowment for International Peace as Greece remained locked in talks with private creditors over writing off a large portion of its debt, in hopes that it would be able to avoid defaulting. If a deal is struck, the IMF is expected to join with the European Union in offering Greece more than in new bailout financing–earlier estimated at EUR130 billion, though with stringent conditions for economic reforms.
Blanchard acknowledged that reforms wouldn΄t be fast enough to right the economy, and that a push for boosting competitiveness vis-a-vis the rest of the euro zone would be essential. “Structural reforms, which have potential in Greece…take a while to take hold. And therefore a country like Greece probably has to do something on the wage side as well,” he said. (via Capital.gr)
IMF: “Greece Needs to Cut Wages to Compete” – How Will People Live is a Question Nobody Cares to Answer…
Drawing plans on sheet papers seem the easy way. IMF’s chief economist Oliver Blanchard said that Greece needs to cut wages in private sector to boost competitiveness. However neither Blanchard nor the other wise-guys, economists or not, seem to be able to answer a simple but practical question: With all income decreases and hikes in taxes, utilities and cost of living…How will the citizens cover their basic needs and feed their children? Does anyone have an idea?
There lies your answer. The total crazy cost of living in Greece is something that should have come down as fast as income. But it didn’t because the state has failed it’s citizens long ago.
(What was it that I read… cost of living in Greece is higher than in Germany?)
in basci food items certainly.
To compete with what? Greece doesnot produce e.g. cars like in Germany to compete with low wages in order to produce cheaper. So what’s the whole point of cutting wages? To see how much more Greeks can take before they start a revolution?
Even for the Greek government it’s bad since tax revenues will be much lower. And since nobody can afford to buy anything, businesses cannot afford to hire cheaper employees anyway.
to compete with …Ireland, Spain and Portugal. Merkel & Co will tell them ‘look Greece is competitive, cut wages too”. At the end the four countries will provide industrial European countries with cheap labourers, so-called “EU Chinese”.
No, but Greece could produce them for German, French, British and even Japanese car-makers. Like Romania and Turkey do for Renault. It has a hardworking and well educated labour force. Advantages to compete easily with those two countries.
And on those products Greece could compete with (agricultural goods and tourism) it is competing with the other Southern European countries.
One of the big mistakes that has been made here over and again is that policies were made and implemented to try and compete on products and services that were already produced elsewhere. Don’t try to compete with German engineering. Hardly anybody can win that race. But find niches and stimulate investments in them.
Internal devaluation was on the cards from the beginning. Think about what will happen outside the euro, when Greece has the Drachma ‘back’ It will devaluate in the same way to get competitive again. It can’t borrow anymore so it will have to live within it’s means. The money press will run hot to still pay out that bloated civil service a.i. the clients of the political class. To quote KTG from another posting:
That is so true and it would have given us all the chance to survive the devaluation. In the euro or outside. But now we are broke and still have to start…