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Achieving lower nominal wage rates is an essential component of a pro-employment recovery strategy for Ireland and not simply a means of achieving budgetary savings, Ireland's Central Bank Governor Patrick Honohan said Monday.
"Wage competitiveness is a key to restoring economic activity and reversing the rise in unemployment," Honohan said at the British-Irish Parliamentary Assembly 40th Plenary Conference in Cavan.
He noted that the aspect of competitiveness deteriorated significantly in Ireland during the boom. Given the fact that euro area inflation will continue to be low in the years ahead, recovering wage competitiveness in the short run must depend largely on containing and indeed reducing nominal wage rates.
Honohan pointed out that the U.K.'s international wage competitiveness has been strongly assisted by the weakness of sterling since the crisis began.
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