BERLIN (MNI) – Bank of England Monetary Policy Committee member
Adam Posen Friday said that persistent low wage growth in Germany was
part of the problem behind the current sovereign debt crisis in the
Eurozone.
“We clearly have got a European crisis to solve,” Posen said in a
speech at a conference organized by Germany’s Greens party. He warned of
“plenty of dangers” due to Greece’s need for an additional bailout from
its Eurozone peers.
The indebtedness of the countries at the periphery of the Eurozone
“has something to do with Germany’s perennial trade surplus,” Posen
argued.
“It is indisputable that slow wage growth [in Germany] over the
last 10 years — with the exception of maybe the last 18 months — has
provided a ceiling on wage growth elsewhere,” he reasoned. This forces
the peripheral states now to significantly bring down the wages in their
countries, leading “to a much harder contraction in income than would
have been necessary otherwise,” he said.
Posen called Germany’s focus on being the largest exporter of the
world “a fool’s game.”
Moreover, Posen reaffirmed his call for European nations to
recognize the losses of their private banks. These losses make banks
vulnerable to the Greek crisis, he argued. “The vulnerabilities of the
banks are a problem,” he added, arguing that the banks “need to be
recapitalized in a public manner.”
–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com
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