Unlike what happened in the years even before the crisis, labour market reforms must be preceded – or least accompanied by – product market reforms, otherwise wage adjustments will not be fully passed on to prices.
Instead, profit mark-ups will rise and the purchasing power of households will fall, thereby worsening the economic conditions of consumers and aggravating any recession.6 During the crisis, because of powerful vested interests, labour market reforms were not accompanied by product market reforms in some countries, and so wages fell and prices did not adjust in tandem.