Clemens Fuest, head of the German Institute for Economic Research (IFO), sees Austria, Germany and Europe are confronted with economic problems. In the “Lunch Journal” of Ö1 he said about the debate about wages: “It is such that wages cannot rise permanently in a stagnating economy.”
Wages and salaries may only rise where there is a shortage of work. “But the overall economy is clear that it is not possible in the long term to increase wages in a stagnant economy,” said Fuest in the interview broadcast on Saturday.
The argument of the trade union, for example, that wages must now rise in the deep crisis to maintain or increase purchasing power and not to reduce possible growth, the economist does not say. Because purchasing power “is currently not the problem”. The problem is stagnation – although the economy in Austria even shrinks for a third year in a row – in combination with a “fairly high” inflation.
Trust the Ban reduction versus
The high inflation shows that there is no lack of demand, but a lack of supply is the problem. “There is only the case that wage increases that continue, although companies have no higher turnover or do not have the income, they ensure that you simply break down jobs.” This was recently the case in the shrinking industry in Austria.
The increased wage in Austria did not recently led to a swing for the economy due to increased costs, but to a higher savings. This is practically due to the times that are generally seen as uncertain times with their many crises to the Russian war in Ukraine. “The real wages have risen, but people are worried and save more. This can already be seen that further wage increases are not leading to more consumption. To get more consumption demand. That means that we need a reasonable economic development. Just raising wages, that is the wrong way.”
Delicate budget questions
Fuest said that Austria, for example, had to improve the infrastructure and the state administration for a megade deficiency in the Austrian budget, billion dollars restrictions and a possible EU deficiency procedure. “There are public tasks that are important for growth.” Tax increases pressed growth. Expenses that are not that important for growth must be reduced. This can be pensions that political resistance can be expected. That should be the political responsible
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
