Brussels, 09/01/2008
The European Central Bank continues to use the argument that oil price hikes will trigger a wage-price spiral. However, this view is wrong for two reasons:
- With hourly wages growing at only 2.6% and with the share of wages in total income continuing to fall, stronger growth in wage earnings does not represent an inflationary danger.
- With an overvalued euro exchange rate and with the financial system still caught in the sub-prime turmoil, the euro area needs robust wage growth to keep driving economic growth and job creation.
Moreover, the ETUC is alarmed by the fact that the ECB seems to lend support to unfair and cut-throat competition by calling minimum wages ‘unnecessary’, even in a situation where pay levels can sink as low as 3 to 4 euros an hour. The ECB is acting well beyond its mandate as defined by the European Treaty.
Reiner Hoffmann, Deputy General Secretary of the ETUC, declares: “The ECB is attacking collective bargaining and fair wages to hide the fact that its Board is apparently unable to provide a policy response to appreciation of the euro exchange rate and the sub-prime financial crisis by cutting interest rates. This is not helpful at all.”