[lbo-talk] Krugman: The existence of the Euro means massivefalling wages

[Chuck Grimes]

> WAGES IN THE PERIPHERY NEED TO FALL 20-30 PERCENT RELATIVE TO GERMANY.
>
> How hard will it be to achieve this? Look at Latvia, which has pursued
> incredibly draconian austerity. Unemployment has risen from 6 percent
> before the crisis to 22.3 percent now -- and wages are, indeed,
> falling. But even in Latvia labor costs have fallen only 5.4 percent
> from their peak; so it will take years of suffering to restore
> competitiveness.

It is bloody interesting, isn't it? One of those situations where
every possible outcome looks highly unlikely.

Mike Beggs
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Exactly my thought too. None of this is going to work. How can you cut wages 
in a consumer based economy and expect to consume your way out?

CG