"in Spain the Philips curve has deteriorated since 2007 (the rate of wage inflation was much higher in 2008 for the same level of unemployment as during the early 2000s). This is probably due to the backwards wage indexation, which transmits the terms-of-trade shocks from higher oil prices to the labour market. Inspection of this chart seems to suggest that an unemployment rate of over 20% is needed to keep wage inflation close to zero. In Germany, by contrast, wage inflation went to zero at an unemployment rate of about 10%."
