Brussels, 27/02/2007 (Agence Europe) - With one eye on company profits and the other on how salaries are developing, Jean-Claude Juncker wants a debate on redistributing the fruits of growth. Speaking on Monday after the Eurogroup meeting under his chairmanship, he said: “We believe we must have a major European debate (…) and this evening I took the firm resolution to launch this debate, with others”. His words do not contradict those of the European Central Bank (ECB), which is quick to call on social partners for salary moderation, but which puts a lot into the broader aim of repartition between profits and salaries. “We are not saying that salary increases should now be on the agenda”, he said, thinking more of worker participation in corporate profits.
Mr Juncker, Luxembourg Prime Minister and Finance Minister, who was “pleased with the sound economic recovery” confirmed by Commission forecasts counting on 2.4% growth of GDP in the eurozone in 2007 (EUROPE 9368), recognises that “salaries should feel the effect of this”. He explained that they believed it was as the Commission has said that inflation should slow down and fall below the 2% level in 2007. He said risks today were “more balanced”. Although the rise in VAT in Germany has not had the feared impact on prices, it would nonetheless be “premature to draw a definitive conclusion” at this stage, he added. “I am not accustomed to making over-strong recommendations to the European Central Bank”, he then told journalists who were anxious to have a message revealed before the meeting of the Governing Council on 8 March, during which market players expect a rise in interest rates for the eurozone. Although short term inflation is being corrected downward, the ECB will look at inflation over the medium term, Mr Juncker admitted after a debate on the influence that salaries have on price formation.
“We believe that salary increases over the whole of the eurozone in past years has been very moderate and in line with the aim of price stability”, allowing Germany in particular to get back on the road to competitiveness. If salary rises continue to be in line with these principles, they “will not pose any problem either in terms of inflation or in terms of loss of competitiveness”. He went on to say: “we believe that all common sense rules have been observed”, and called on member states that have experienced an over-marked rise in salaries compared to productivity to undertake more pronounced structural reform. Nonetheless, “with the economic recovery we are witnessing at present, it is obvious that the question of distributing the fruits of re-found growth will be the focus of concerns expressed by governments, social partners and also EU citizens”, said Mr Juncker, without calling into question the principle of evolution in line with productivity. As unemployment rates continue to be too high throughout the eurozone, one must bear in mind, during salary negotiation, that there is also a need to create jobs. Salaries need not necessarily be adjusted upward, said Mr Junker, who noted that salaries are not everything and that there are other ways to enjoy the fruits of growth, for example, by worker participation in corporate profits. Joaquín Almunia, Commissioner for Economic and Monetary Affairs, said it was necessary to improve social dialogue, and dialogue between social partners and the Eurogroup. He went on to announce that DG Ecfin will be presenting an examination to ministers during the second term on the impact that the breakdown of company profits and salaries will have at macro-economic level.
The Eurogroup also signed up to the Commission's analysis, recognising that this period of good economic growth must be used to advantage to reduce the levels of public debt and deficit. For some member states, the rate of progress toward the medium-term objective “leaves much to be desired”, said Mr Juncker, as Commissioner Almunia stated that adjustment efforts remain below the objectives of the Stability and Growth Pact (0.5% of structural adjustment annually) that have been reached only by Ireland, Finland and the Netherlands. While Italy and Portugal are “on the right track”, Germany and Greece are likely to experience repeal of the excessive deficit procedure during the first half of the year. These four countries, as well as a large majority of the other countries, should reinforce their efforts to improve their public finance in order to ensure sustainability, said Mr Almunia. On the subject of updating the Broad Economic Policy Guidelines (BEPG) for 2007, the EU13 ministers accepted specific recommendations for the eurozone taken up in the document forwarded to heads of state and government and adopted by the EU27 (EUROPE 9374). These four recommendations will be the subject of Eurogroup monitoring, Mr Juncker stressed. (ab)