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ECB's Draghi calls for wage cuts to help the euro
[HELSINKI] European Central Bank chief Mario Draghi on Thursday called for an "adjustment of wages" in the eurozone to strengthen the viability of the single currency.
"All euro area countries need to be able to thrive independently," Mr Draghi said in a speech in Helsinki.
"This means that every economy has to be flexible enough to find and exploit their comparative advantages, so as to benefit from the Single Market," he said.
The central bank president said European economies needed to "allocate resources efficiently" in order to "attract capital and generate enough jobs." "They also have to be flexible enough to respond quickly to short-term shocks, including through adjustment of wages or reallocating resources across sectors," he added.
Cutting wages has been a key element in the international bailouts of eurozone members, as lowering salaries is one of the only options to increase competitiveness left open to countries sharing the euro as they can no longer devalue their currencies.
Mr Draghi also said that although the euro was "irrevocable", the monetary union was "still incomplete" since there was no permanent mechanism for wealth transfer from richer nations to poorer ones, and limited cross-border mobility of the unemployed.
Consequently, there was a need in the eurozone for permanent mechanisms that would ensure a crisis in one country didn't have a dramatic effect on the rest of the bloc.
"The lack of structural reforms raises the spectre of permanent economic divergence between members. And insofar as this threatens the essential cohesion of the Union, this has potentially damaging consequences for all EMU members," he said.