ABSTRACT
In this article we examine the evolution of wages and of wage-setting systems before and after the introduction of the euro in 1999. We concentrate on wage restraint – the change in nominal wage growth minus the change in labour productivity growth (a negative outcome indicates wage restraint as opposed to wage excess; see note 1 for further details). During the Maastricht period, aggregate nominal wage restraint cycles of some European monetary union (EMU) candidate countries and Germany, as well as wage restraint cycles of the exposed and sheltered sectors, were highly synchronized. After the introduction of the euro, nominal wage growth remained low compared to the Maastricht period – but after 1999 different trajectories emerged between EMU member states, including those that previously belonged to the highly disciplined Deutschmark bloc, and between wage-setting in the exposed and sheltered sectors within countries.
