Labour cost drop remarkable, says Rehn

The reduction in labour costs in Ireland has been described as “remarkable” by the European economics commissioner Olli Rehn, who said further falls were expected this year and next.

The European Commission’s spring economic forecast downgraded Ireland’s growth expectations this year and in 2013 to lower than the Government’s latest adjusted expectations. This year they expect growth of 0.5%, compared with the more optimistic forecast from the Government of 0.7%, and 1.9% next year compared with Government expectations of 2.2%. Six months ago, the Commission’s forecast was for 1.1% and 2.3%.

Real unit labour costs dropped by 3.7% last year and are expected to drop by a further 3.1% this year, fourth highest in the EU, and a greater drop than forecast six months ago. The forecast for next year is for a further drop of 2.3%, the largest in the EU and even higher than the -1.1% expected in Greece.