EU set to monitor wage costs

The European Union will monitor wage costs in each member state to help them stay competitive, European Monetary Affairs commissioner Olli Rehn was quoted as saying in a German newspaper today.

In comments released earlier, Mr Rehn also said countries that share the euro currency must grant debt-strapped Ireland and Greece easier terms on loans they have provided, and that the time frame of loans to Greece should be expanded to seven years from three-and-a-half years.

"In the future, we will regularly check the development of wage unit costs in each member state," Mr Rehn was quoted as saying in an interview published in today's edition of the Handelsblatt business daily. "That will be a key element of the EU's economic policy."

An EU document prepared for a euro zone leaders' summit to address the debt crisis on March 11th says wage and productivity developments should form the basis for assessing progress towards greater competitiveness.

Unit labour costs should be monitored and compared with those in other euro zone countries and main trading partners, according to the document written by aides to European Commission president Jose Manual Barroso and European Council president Herman van Rompuy.

Mr Rehn confirmed wage policy would play an especially key role in the euro zone competitiveness pact because it was crucial in the common currency area to keep wages linked to productivity.

"The best thing would be to allow, within the wider framework of collective wage scales, decentralised salary agreements that are modelled on the productivity development of individual companies," he told Handelsblatt.

Several countries such as Austria have expressed reservations about supranational institutions intervening in their wage policy.

Turning to the euro zone's rescue fund, Mr Rehn appealed to Germany's lower house of parliament, the Bundestag, to soften its opposition to expanding the fund's powers to combat Europe's debt crisis.

"I urge the Bundestag not to lose sight of the continuing difficulties in financial markets... several euro zone states are still in danger," he said.

The Bundestag has forwarded a motion to be voted on in mid-March that seeks to rule out bond buybacks by the euro zone's permanent rescue fund after 2013.

Reuters