The vice president of the European Central Bank (ECB), Luis de Guindos, considers it necessary to put a stop to the revaluation of salaries. Many of them traded higher in recent months after the outbreak of inflation in the eurozone. But the time has come to change pace.
The former Spanish minister, who spoke this morning electronically at an event at Foment del Treball within the framework of the meeting of his group of tax experts, stressed that an increase in unit labor costs is being recorded in the eurozone.
That is to say, while in previous months the increase in business margins had been higher than the salary increase, now this relationship of strength has been rebalanced. Because salaries are rising at a rate of 5%, while economic growth is going through a phase of stagnation.
This means, De Guindos has reasoned, that a decline in productivity is occurring. And this upward trend in salaries does not contribute to fighting against inflation that has been revised upwards for this year and which is finding it difficult to lower its head.
"Companies should absorb this salary increase without necessarily passing it on to prices," he stated. The economic deterioration that worries De Guindos is manifested in particular by the brutal decrease in credits and the impact on consumption (practically paralyzed), in a context in which variable rate mortgages imply an increase in payments that will affect the families.
The slowdown in China, the transmission of monetary policy (increasingly tougher) and the rebound in oil are touching the economic engine of the eurozone, according to the vice president of the ECB.
Regarding the reasons why underlying inflation - one of the factors that the ECB most closely follows in its interest rate decisions - continues to persist even after the greatest monetary tightening in the history of the ECB, De Guindos has provided two explanations.
One is that even though energy prices left their peaks behind after the outbreak of the war in Ukraine, it is possible that the production cycle has incorporated this increase in costs with some delay and has had an impact on prices.
The second is that there has been an increase in demand in the services sector, something visible for example in the recent success of the tourist season. And this phenomenon has caused an increase in prices in these economic branches.
In the debate, the demand to support a more harmonized fiscal policy and improve the functioning of the European internal market has once again been put on the table. In this sense, De Guindos recalled that "fiscal policy cannot go against a restrictive monetary policy" and therefore advocated for the gradual elimination of the set of subsidies that European governments implemented on the occasion of the energy rebound. after the invasion of Ukraine.
