Depressing wages

I was looking again yesterday at last week’s press-conference by Poul Thomsen, the International Monetary Fund’s mission chief for Greece. Despite the bleak projections about growth (-3.7%) and inflation (+2.9%), Thomsen tried to convey a positive message, by suggesting that the competitiveness of the Greek economy shows signs of recovery, as the cuts in public sector wages and the rise in unemployment have contributed to a 7% drop in average wages in industry (private sector excluding agriculture and services) and an overall drop in unit labour costs (an index of productivity-discounted production costs) by 8%. Thomsen emphasised the need for further reforms and a continuing commitment to containing labour costs as the sine-qua-non condition for a Greek recovery.