Ott Ummelas via Businessweek
May 25 (Bloomberg) -- Estonia, which won the European Commission’s backing to become the euro’s 17th member in January, must push through deeper wage cuts to remain competitive or risk seeing its external debt level rise, Capital Economics said.
Unit labor costs have risen by more than 30 percent in Estonia since 2006, compared with 7 percent in Germany, David Oxley, a London-based emerging markets economist at Capital Economics wrote in a note today. The real effective exchange rate of the kroon adjusted for unit labor costs “would make Estonia one of the least competitive euro-zone economies,” he said.
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Estonia Needs ‘Corrective’ Pay Cuts to Revive Trade, Oxley Says