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Ist eine Deregulierung der Arbeitsmärkte in den südlichen EU-Staaten zur Bekämpfung der Eurokrise sinnvoll?
[Does deregulation of labor markets in Southern EU-countries solve the Euro crisis?]

Author

Listed:
  • Fischer, Justina AV

Abstract

One solution to the euro crisis as a debt crisis can be found in stimulating economic growth. The Troika has proposed measures to deregulate labor markets in Southern EU countries: a longer working week, relaxation of job dismissal laws, raising the age of retirement. A longer working week for the same pay is the same as a de facto wage cut. A loosening of dismissal laws can be seen as an attempt to increase worker productivity against the threat of disciplinary action but may also increase the willingness of employers to take on new staff. Raising the age of retirement helps ease the labor cost burden on employers. Due to the structural differences in the economies of Southern Europe, a programme of deregulation based on lower wages only will not solve the euro crisis. Only in the case of Greece, Europe’s biggest 'problem child', would a general wage cut lead to improved competitiveness – regardless of the pain such a reform would cause. This is because Greece’s neighbours Turkey and Bulgaria, both offer the same products in the areas of tourism (“Sun, Sea and Sand”) and regional foodstuffs (olive oil, ewe’s milk cheese) but at a lower price. On the other hand, for Spain and Portugal efforts to stimulate innovation and increase productivity in the major industrial and agricultural businesses are recommended, while in Italy improving the quality in its luxury sector (wine, design, cultural tourism) would seem to make better sense than deregulating their lbor markets. It is also open to debate whether a foreign company would base its decision to locate to a particular European country solely on the existence of a flexible low wage sector. Europe has other factors in its favour such as high educational levels, a well-developed infrastructure, political and social stability as well as local cultural highlights and a high quality natural environment; labour-intensive industrial mass production is offered far cheaper in China and Vietnam. Of equal importance is the Troika’s insistence on combating nepotism and corruption. An economic policy that promotes productivity and quality will in the long run also prevent the creation of extreme disparities in income and thereby ensure social cohesion.

Suggested Citation

  • Fischer, Justina AV, 2012. "Ist eine Deregulierung der Arbeitsmärkte in den südlichen EU-Staaten zur Bekämpfung der Eurokrise sinnvoll?
    [Does deregulation of labor markets in Southern EU-countries solve the Euro crisis?]
    ," MPRA Paper 41543, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:41543
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    File URL: https://mpra.ub.uni-muenchen.de/41543/2/MPRA_paper_41543.pdf
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    References listed on IDEAS

    as
    1. Fischer, Justina A.V., 2012. "The choice of domestic policies in a globalized economy," Papers 306, World Trade Institute.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Euro; Eurocrisis; debt crisis; labor market; deregulation; EU; Greece; Italy; Spain; Portugal;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • J83 - Labor and Demographic Economics - - Labor Standards - - - Workers' Rights
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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