Wednesday

31st Aug 2016

EU commissioner asks Germany to raise wages

EU social commissioner Laszlo Andor has asked Germany to raise its wages in order to boost consumption and help other countries in the eurozone to export more.

A shift from budget cuts and austerity towards economic stimulus is needed to help the southern euro-countries overcome the crisis, Andor told Sueddeutsche Zeitung in an interview published on Monday (29 April).

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  • German shopper at discount supermarket Aldi - Andor says higher wages will increase consumption of EU-made products (Photo: regioblogview)

"Saving alone does not create growth. That requires additional investment and demand," he said.

Andor, a left-wing economist from Hungary, also pleaded for countries like Spain, Italy and France to be given more time to bring their deficit in line with EU rules. If not, he warned, all these countries will just pile on more debt.

He advocated a minimum wage in Germany - a demand also being made by the Socialist-Green opposition - explaining that it would help raise overall wages and boost consumption in the EU's largest economy.

"Belgium and France have been complaining about German wage dumping," Andor added.

If Germany continues to keep the wages low and have high export surpluses, the commissioner warned, "the currency union will drift apart. Cohesion is already half lost."

His remarks come after similar calls from the US government and the International Monetary Fund for Germany to do more boost internal consumption and help other eurozone countries with their exports.

EU commission chief Jose Manuel Barroso last week also warned about the "limits of austerity."

But he later emphasised the need for budget consolidation to continue.

For its part, the German government is claiming that it is already boosting internal consumption and that wages are increasing.

It says minimum wages have been introduced in a series of vulnerable sectors, such as construction and services.

Germany's central bank, the Bundesbank, warned in February against raising wages too quickly, as companies would fire people and invest less.

Dramatically increasing wages would only temporarily boost consumer demand, it argued, and in the long run, real incomes and consumer spending would actually decrease.

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