I ran across this chart on the growth in compensation per employee in the eurozone pre-crisis. It comes from the German Institute for Economic Research, the same institution that believes German banks need 127 billion euros of additional capital (Hat tip billyblog).
Notice that 10% ‘internal devaluation’ in Germany took eight years. We are talking now about 20-30% wage and price cuts in Greece and Ireland. How realistic is that?
P.S. – what does this mean for ‘competitiveness’ in Finland and Spain? Update: regardless of the source, I can’t get the numbers for Spain to mesh with the known increase in compensation and labor cost. I find it surprising that these numbers would show a decline.
Source: Real Wages in Germany: Numerous Years of Decline (PDF), DIW