German wage rises, exports offer hope for euro zone

Hourly labour costs rise 1.6 per cent in first quarter
|payroll-reporter.com|Last Updated: 06/18/2013

(Reuters)  German wages rose at their fastest pace in almost four years at the start of 2013 and euro zone exports jumped in April, giving the bloc a basis for a recovery from its long recession.

Nominal hourly labour costs rose 3.9 per cent in Germany in the first quarter, the EU's statistics office Eurostat said on June 17, faster than the overall euro zone rate of 1.6 per cent. It was Germany's biggest jump since the first three months of 2009.

Higher wages in Europe's largest economy should mean German shoppers have more cash to splash out on Spanish holidays, Italian cars and Portuguese wine, potentially helping depressed southern Europe out of its downturn.

That stands in contrast to the pay cuts and job losses in much of the euro zone that have hurt the bloc because consumer spending makes up about half of the economy.

In another positive sign, euro zone exports to the rest of the world grew nine per cent in April while imports only rose one per cent, giving the 17 countries sharing the single currency a trade surplus of 14.9 billion euros (US$20 billion).

Struggling to emerge from its public debt and banking crisis, the euro zone is looking to both foreign demand and consumers to help ignite economic growth when the bloc is in its longest recession since its creation in 1999.

A slowly recovering U.S. economy and strong Chinese demand mean euro zone exports still have a market, and falling labour costs in southern Europe have made their goods more competitive internationally.

Spanish labour costs fell 0.7 per cent in the first quarter, while exports rose three per cent in the same period, Eurostat said.

The European Commission, the EU's executive, has told governments they must focus on reforms to outdated labour and pension systems to regain Europe's lost business dynamism, trying to shift the focus away from budget cuts towards growth.

But that may take time to translate into jobs and greater prosperity, and joblessness is at a record high.

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