Rehn: Lufthansa Strikes Part of Economic Rebalancing

A Deutsche Lufthansa AG (LHA) strike is a symptom of economic rebalancing that eventually will help the euro area recover from its financial crisis, European Union Economic and Monetary Affairs Commissioner Olli Rehn said.

The Cologne-based airline suspended almost its entire timetable for a full day as a strike over pay crippled operations at Europe’s second-largest airline and upset travel plans for 150,000 people. Lufthansa shares rose 1.4 percent to 14.11 euros in Frankfurt.

Europe is cutting debt and taking steps to make its economies more competitive, particularly in southern countries such as Spain that have sought assistance, Rehn said at a conference in New York. At the same time, healthier northern European nations are losing some of their longtime edge and may have to give up ground, he said.

“The strikes of Lufthansa are in fact a symptom of this rebalancing,” Rehn said. He said Germany is facing pressure to increase wages at the same time its southern neighbors become more competitive.

Companies across Europe have been struggling to rein in costs as the euro zone confronts projections that its economy will shrink for a second straight year.

At last weekend’s spring meetings of the World Bank and International Monetary Fund, the U.S. led calls for the U.K. and the euro-area to rethink whether axing budgets and cutting debt is the right remedy for recession.

Speaking today at the Federal Reserve Bank of New York, Rehn said the euro area is undergoing a “necessary” economic rebalancing and “must stay the reform course.” He acknowledged that the EU can’t rely on monetary policy as it seeks to restore growth and said debt-cutting strategies have been flexible in response to the prolonged downturn.

“We have received plenty of advice, also in recent days, on the pace of fiscal consolidation in Europe,” Rehn said. “Well, I will let you into a secret: The pace of consolidation in Europe has already been slowing down since last year.”

To contact the reporters on this story: Rebecca Christie in Brussels at rchristie4@bloomberg.net; Stefan Riecher in Frankfurt at sriecher@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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