The central bank’s position on wage developments is a matter of controversy.
(Photo: IMAGO/Hannelore Föster)
Frankfurt In the European Central Bank (ECB), the issue of wages is once again causing controversy. The focus is on the question: How much can they rise from an economic point of view? The trade union of the employees of the European Central Bank accuses the central bank of a one-sided attitude to the detriment of the employees.
The debate is fueled by the current high level of inflation. Central bank officials warn of a wage-price spiral in which higher wages and prices reinforce each other. That’s why they keep calling for wage restraint.
In a recent interview with the Süddeutsche Zeitung, ECB Vice President Luis de Guindos warned that unions could be inclined to demand too much wage compensation. “We have to be careful there.” There should be no wage-price spiral. He also suggested that if people waived part of their wage demands, the ECB would not have to tighten its monetary policy as much.
The IPSO trade union, which represents seven of the nine elected members of the ECB’s staff committee, takes a critical view of such warnings. She also refers to current data that shows that the profit margins of companies in individual sectors have recently increased significantly.
In an email from IPSO to ECB staff on March 7, it said: “For some time we have been trying to draw your attention to the fact that the ECB’s stance on wage moderation is unfounded.” The position was “part of the DNA of the ECB” and “has led to serious monetary policy mistakes in the past”.
The example given is the interest rate hike by the ECB in July 2008, two months before the global financial crisis peaked with the bankruptcy of the US bank Lehman Brothers. This was justified, among other things, with concerns about a wage-price spiral.
Lagarde for “reasonable burden sharing”
Most recently, ECB President Christine Lagarde had struck a slightly different tone on the subject of wages. At her press conference in mid-March, she spoke out in favor of an “appropriate burden sharing” between employees and employers, given the sharp rise in costs for energy, for example.
From IPSO’s point of view, however, this did not go far enough. The union calls for a debate about its own position. In another email dated March 22, IPSO praised the fact that the issue of burden sharing was now openly discussed. However, Lagarde gave the impression “that this is not a consideration that the ECB should make, only society in general and companies”.
From IPSO’s point of view, however, the issue also affects the central bank. This has “repeatedly spoken out against wage increases because they feared a wage-price spiral”. However, this concern was unfounded. “A closer look at the studies available from the ECB and the International Monetary Fund (IMF) does not speak in favor of wage restraint,” says IPSO Vice President Carlos Bowles.
Upon request, the ECB rejects the allegation of bias against the employees. Lagarde’s recent statements about the need for burden-sharing between employers and employees contradict this. The statements were based on thorough analysis.
IPSO is now calling for more debate in the ECB on related issues. From the point of view of the trade union, this includes the question of how much wages can rise without triggering a wage-price spiral or what a fair distribution of the burden between company profits, wages and the interests of future generations could look like.
More: Trade union confederation warns ECB against further interest rate hikes – “Collateral damage would be enormous”