Fiscal austerity and wage restraint

In this Flash we defend the following idea: it is not possible to end fiscal austerity in OECD countries without ending wage restraint. This is because wage restraint makes it possible to have a small increase in labour costs, low inflation, and eventually low interest rates that enable fiscal deficits and rising public debt ratios. An end to wage restraint would drive up interest rates and make it necessary to implement fiscal austerity . If a choice has to be made between an absence of fiscal austerity and an absence of wage restraint , it is not certain that the current choice (wage restraint and end of fiscal austerity) is the right one .