Andor endorses German calls for wage increases

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László Andor, the EU's commissioner for employment and social affairs, yesterday (10 May) welcomed indications that Germany is prepared to bear inflation above the European Central Bank's target level and raise wages to help the struggling peripheral eurozone.

“In this scenario Germany could in the future have an inflation rate somewhat above the average within EMU,” according to a note by the Bundesbank sent to parliamentarians on Wednesday (9 May).

German finance minister Wolfgang Schäuble also appealed earlier this week to social partners to bring about significant wage increases, which would raise the relative competitiveness of the eurozone periphery.

Memories of hyperinflation spooked Germans

Memories of the effects of hyperinflation during the 1920s have made the issue taboo in Germany, and Schäuble’s comments on wages represented a significant shift from previously unyielding remarks on the subject.

“The acceptance of higher inflation in Germany, if I have understood it correctly, will enable the European Central Bank to be a more European bank with a more monetary policy,” Andor told EURACTIV on the fringes of a European Meeting of People Experiencing Poverty.

At another event on social Europe earlier in the week (8 May) the Hungarian commissioner said that the EU executive could consider wage rises within the context of its country-specific recommendations.

The Commissioner indicated that he would seek to have a voice at the table with Economic and Finance Commissioner Olli Rehn when those recommendations are made.

Andor raises voice as left sweeps European elections

The socialist economist set himself apart from colleagues last year by decrying "unsustainable" austerity measures which he said "are clearly not working”. His influence has been limited by his relative isolation as a left-winger amongst a centre-right dominated European Commission.

The changed electoral landscape is likely to give him a louder voice at the table. Following the French election last week, the Commission will have to reflect the reality of a socialist President in the eurozone’s second-largest economy.

“The landscape in Europe has to change course,” Andor told EURACTIV at the poverty event. He said that the French election was only one aspect of a general shift in the political climate, citing the recent election of socialists in Slovakia and Romania, and a strong showing for the UK’s Labour party in local elections held there last week.

Meanwhile delegates at the People Experiencing Poverty conference presented a symbolic ‘red card’ of warning to the European institutions with a declaration.

They said EU policies to combat the economic and financial crisis are creating more poverty and social exclusion.

“You must take this message to heart and act accordingly: Europe’s future depends on it!” the declaration said.

“According to press reports the German central bank may accept salary increases. We believe that there is room for manoeuvre [in the context of wage policies] within some countries to support internal demand within the single market,” an EU spokesman said.

“Poverty is affecting around 100 million people in Europe,” Fintan Farrell, the director of the European Anti-Poverty Network said at the event. “That would represent a huge country if they were all together, and they have the right to be heard, and to have a voice at the table,” he added.

Labour cost differences across Europe can be huge, according to recent figures by the European statistical office Eurostat.

Hourly labour costs for 2011 range from €3.5 in Bulgaria to €39.3 in Belgium, the highest in the European Union.

In Germany, the hourly labour cost is €30.1 compared to France's €34.2. This German austerity in wages has often been decried in France where it is assimilated to unfair competition.

  • 11 May: European economic forecasts will be published, background for the European Semester, which sees country-specific requirements laid out.

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