The decline in wage growth has contributed, at the margins, to a turnaround in the real exchange rate and helped cushion the effect of slower growth of domestic demand on employment growth. It has also helped to contain domestic cost pressures thereby offsetting the effect of the lower exchange rate on consumer prices.
Last but not least, I’d like to quote a rather long sentence from a report published last week by the ECB: “With a view to increasing the employment and growth potential by making the economy more flexible, thereby maintaining the sustainability of public finances and price stability, national policies aiming at improving the functioning of product and labour markets are also needed, while social partners will need to ensure that wage developments are in line with labour productivity growth and developments in competitor countries.” I’m sure you know that this statement does not refer to Germany but to Sweden.