Here is a picture, taken from a paper by Ben Bernanke, which anyone resisting wage cuts in the Irish context today needs to take seriously. These are countries which (mistakenly) stuck to gold until the bitter end. Like ourselves, therefore, they did not have the option of devaluing. (No, I am not saying we should leave EMU.) The more wages fell, the less output declined. (And yes, the result comes through in regressions which control for other stuff.) The question today is, do we want to end up looking more like Belgium, the Netherlands or Poland, or like France and Switzerland?