'Wage cuts necessary' - BoS Governor

The governor of the Bank of Spain, Miguel Ángel Fernández Ordóñez, said yesterday how the only way for euro zone countries such as Spain to restore competitiveness was to cut salaries as a means to increasing productivity.

Just last week the Government passed a series of labour reforms intended to make the process of employment of staff, together with redundancies, easier in order to encourage businesses to take on extra workers.

He explained “In the absence of the possibility of a foreign exchange devaluation, domestic devaluation... the only alternatives available in the very short term to give a push to and recover lost competitiveness."

Ordóñez praised the action of the ECB and urged European leaders to push ahead with the establishment of the European Stability Mechanism, the permanent version of the European Financial Stability Fund. “Short-term measures by the ECB do not serve to resolve the core problem exposed by the crisis: the need for mechanisms that address the risks that occur as a result of countries having heterogeneous structures,” he said.