The euro - wages - employment

Abstract

The arrival of the euro will do away with all possibilities of using exchange rate adjustments to accommodate excessively high or excessively low pay settlements. In a situation of mass unemployment and extremely slow price developments, there is a risk of excessively low wage settlements being reached in order to win markets to the detriment of Euro-partners. There is a threat of mercantilist races to devaluation and a deflatory spiral would destroy any successes achieved on the growth and employment front. Under a single monetary and coordinated fiscal policy (EU stability pact), there is also a need to seek to coordinate incomes policies. The participants must undertake to abide by a macro-economic criterion of wage determination. The productivity trends of the national economies, taken together with the European Central Bank's unavoidable inflation forecast, are useful macro-economic indicators. Such concertation, hitherto neglected in the Treaties, is a task for the labour market partners and the Community bodies.