FRANKFURT - Falling wages in Germany could choke off chronically weak domestic demand in the eurozone's biggest economy, a member of the government's "Five Wise Men" panel of independent economic advisors said in a newspaper interview released Monday.
Peter Bofinger, economics professor at Wuerzburg university, told the business daily Handelsblatt in an interview scheduled to be published on Tuesday but released in advance that falling wages would undermine already sluggish consumer demand.
Unit wage costs in the German manufacturing sector had fallen by seven percent over the past three years. And companies' wage costs had been reduced by the government's latest healthcare reforms.
At the same time, employees were having to pay more.
"That doesn't fit in with the economic landscape. It will only increase deflationary dangers," Bofinger said.
And downward pressure on wages from the eastward expansion of European Union also had to be stopped, the expert said.
"Polish wages must be brought up to German levels rather than the other way around," Bofinger said.
04/25/2005 14:15 GMT