Bundesbank board member Andreas Dombret said some distressed euro area countries’ revamps of their labor markets may not be sufficient to boost growth and improve competitiveness.
As the groundwork that has allowed German unemployment to fall to a 21-year low was laid a decade ago, “the measures introduced, particularly in Spain, Italy and Greece, will not lead to full-time employment overnight, particularly since the devil is in the detail,” Dombret said, according to the text of a speech delivered in Goettingen, Germany, today.
“So, it’s not certain that the most recent changes are enough to sufficiently improve the efficiency and permeability of their respective labor markets,” he said.
The government in Spain, which is currently resisting asking for more aid from Europe’s bailout fund in order to trigger the European Central Bank buying of its bonds, cut firing costs in February, changed wage-bargaining laws and ruled that jobless people on benefits will have to offer community service in an overhaul of labor rules aimed at tackling the 23 percent unemployment rate.
Dombret said that “efficient labor markets are a central plank to overcoming the crisis” and that the ECB’s primary contribution remains maintaining price stability, not fixing “government failures to stem problems.”