Wage hell for exporters
The Great Devaluation of the Czech Crown on Nov. 7, 2013, locked in the value of the crown at Kč 27/euro, giving exporters and other employers unusual currency predictability. It also gave them unusual wage stability by locking in the differential with Germany. Wages continued to rise in the CR in crown terms during the 3.5 years of the devaluation, but in euros they declined in relation to German wages. There wasn't convergence, but rather deconvergence (as a graph in HN demonstrates). This changed abruptly on April 6 of last year, when the crown was set free from the euro. In the first quarter of this year, average Czech wages jumped y/y in crowns by 8.6%, but the increase in euros was a staggering 15.4%. This is likely the figure that will most interest corporate planners. And with the CNB striving to push the crown up in value, and with labor unions demanding ever higher wages, similar increases in the future in euro terms are now almost predictable.
Glossary of difficult words
to lock in - to do something that makes one sure to get something that could change, such as a good price, an interest rate, etc.;staggering - so great as to cause one to stagger or nearly fall over.