Advertisements
Advertisements

Differences in central banker pay illustrates why the euro is not an “optimal currency area”

Bloomberg has a great story on differences in the pay of different central bank governors within the euro area.

This graph is from the Bloomberg story:

cb pay

As the graph illustrates there is a massive difference between how much the different euro zone central bank governors are paid. These differences probably very well reflect the general differences in income levels within the euro area.

Normally we would say that a core condition for being a “Optimal Currency Area” is that the income (productivity) level of different countries/regions within the currency area should be on a fairly similar level. The pay differences of euro zone central bankers illustrates quite well that this core condition is not fulfilled within the euro area.

PS  This is from the Bloomberg story: “The economic turmoil has also crimped earnings at the Greek central bank. Governor Yannis Stournaras gets 7,342 euros a month after taxes following two rounds of voluntary cuts by his predecessor, by 20 percent and 30 percent.”

Advertisements
Leave a comment

1 Comment

  1. Nicholas Glenn

     /  January 7, 2015

    You should run into the same problems in the U.S. if difference in income levels is a problem. There is a large discrepancy in income levels between the South and the Northeast. However, it doesn’t seem to cause any problems here. The South doesn’t have the structural problems that trouble a lot of the low income countries in Europe though.

    Reply

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: