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Assume that the Eurozone is indeed large enough to be able to engage in internal redistribution. A plan to raise wages in the periphery would involve directing investment away from Germany and into capital formation in peripheral countries whose problem is actually low capital intensity relative to the core. But this would imply that German wages would have to stagnate. Peer Steinbrück just proposed a minimum wage of €8.50 for Germany. With a 40-hour workweek that's 340 Euros a week. Spain's minimum wage is €645, less than half of Steinbrück's proposed minimum wage.

The point being that it's extremely unlikely that Germans would accept EU-level redistribution which would entail at most stagnating real wages for them. Or would they?

Finance is the brain [tumour] of the economy

by Migeru (migeru at eurotrib dot com) on Thu Aug 29th, 2013 at 02:32:32 PM EST

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