This afternoon’s exercise Collective bargaining between the social partners on wages Three groups: Employers Trade unions Government Each group has 45’ to prepare for negotiations and 60’ to negotiate First round of negotiations: between employers and trade unions only : Preparing of negotiation by the 3 groups : Negotiation between social partners (and agreement) : Coffee break Second round of negotiations: between the social partners and the government : Negotiation between social partners and government Split - September 2011 Wage negotiations

Key figures for Croatia Economic growth (%) Unemployment rate (%) Inflation (%) Productivity growth (%) Wage share (% of GDP) Balance on current account (% of GDP) Budget deficit (% of GDP) Gross public debt (% of GDP)

Key figures Unemployment rate When the unemployment rate is high, labour cost increases should be kept under control so that the necessary jobs can be created. Inflation When inflation increases faster than wages, the purchasing power of households suffers. Productivity growth Productivity growth can translate into lower prices (which improve competitiveness), higher wages for employees or higher remuneration for capital. Wage share A decreasing wage share implies that a smaller part of the GDP is being reserved for wages. As a result, a bigger part of GDP is being reserved for the remuneration of capital. Balance on current account A country with a negative balance on its current account lives beyond its means: its expenditure is higher than its income. This could indicate that the country is losing competitiveness. Budget deficit The higher the budget deficit, the less room for manoeuvre the government has to help wage negotiations.