In his May 21 opinion article, “Rebalancing eurozone wages and productivity,” Kemal Dervis only describes the link between the debt problem and high wages in southern European countries. The article fails to put forward how to tackle the debt problem.
Recent International Monetary Fund prescriptions for Greece, already implemented, imply a 20 percent cut in public sector salaries, 40 percent cut in pensions, high taxes, cuts in public services and privatizations of utilities with resultant price rises.
All of these are driving down real wages in Greece, and it will be the same for other southern European countries. They may reduce government budget deficits, but they won’t have any effect on Greece’s balance of payments or existing foreign debts.
Greece’s export items consist of refined petroleum products, some chemicals, shipping and tourism. All are in the private sector, not in the public sector where the past wage explosions took place.
The only real solution to balance-of-payment deficits in southern European countries is to devalue the euro (against the yen) and bring it lower than the dollar. That will improve competitiveness in Greece and other southern European countries, while helping northerners expand their markets beyond Europe.
The opinions expressed in this letter to the editor are the writer’s own and do not necessarily reflect the policies of The Japan Times.