Progressive policies for wage-led growth in Europe

Policy Brief

06/04/2016

Europe needs a fundamental rethinking of its economic policy. The crisis in Europe has laid bare the fundament flaws of the European economic policy regime based on the Maastricht Treaty and the Stability and Growth Pact. The EU’s policy mix has resulted in a deep economic crisis in southern Europe and a weak recovery in the northern countries, with the Euro area teetering at the brink of deflation. Europe needs a fundamental rethink of fiscal policy, monetary policy, financial regulation and wage policy.

Individual EU Members States (MS) and the European Commission (EC) have long encouraged wage moderation, explicitly recommending real wage growth below productivity growth to increase the international competitiveness of the EU. This policy has resulted in three decades of increasing inequality, declining share of wages in national income, and the emergence of a new class of super rich without generating a sustainable growth model for Europe. 

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