For years, the European Central Bank (ECB) has tried with its monetary policy to achieve at least two percent inflation in the euro area. Currently, higher key interest rates are supposed to stop double-digit inflation rates. The struggle for higher wages among employees shows that the ECB is also lagging behind price developments internally. The staff representatives of the ECB are disappointed with the salary increase of 4.07 percent planned for 2023. This is not enough for the ECB union called International and European Public Services Organization (Ipso), especially since it is following an already rather narrow increase of 1.48 percent for 2022 – less than half of German inflation in 2021.
“We are not happy with the proposal,” Carlos Bowles, Ipso’s vice president, told Bloomberg. “Since inflation in Germany and the euro zone is likely to be 8.5 percent this year, this means a significant loss of purchasing power.” When real wages fall, “it hurts morale and also hurts their confidence in the institution,” Bowles said. The ECB is also not ready for non-financial proposals such as additional vacation days. “If a negotiated compromise continues to be rejected by the ECB, we need to consider protest action early next year,” Bowles said. An ECB spokesman declined to comment
The ECB’s internal wage war coincides with increased monetary policy attention to wage deals and their potentially inflationary impact. ECB President Christine Lagarde recently noted that wage growth was “picking up” and warned of a “self-destructive” wage-price spiral. However, ECB unionist Bowles can also argue monetary policy and refers to IMF studies according to which faster growth in nominal wages “is not necessarily a sign that a wage-price spiral is starting”. The employees of the Brazilian central bank have even gone on strike this year for higher wages.