As a result of the adjustment strategy followed, the real value of wages, pensions and savings declined sharply and wealth was transferred from creditors to debtors. Money illusion blurred the perception of the adjustment costs and of the fundamentally unbalanced burden-sharing. The 1983 programme brought the current account back into balance and put inflation and the general government deficit on a declining path.
The rather protracted upward trend in services prices is, in this respect, one factor to be closely monitored. In addition, prospects for price stability depend largely on wage moderation. It is a mistake to believe that high wage rises per se will increase aggregate demand in real terms. On the contrary, excessive wage claims will increase costs and create inflationary pressures.