Staff representatives at the European Central Bank (ECB) are disappointed that a planned salary increase is not compensating for inflation that is currently five times the official target of 2%. The ECB union, known as the International and European Public Services Organization, or IPSO, wants to amend a 4.07% pay increase that will take effect in 2023 and follows a 1.48% increase for 2022, minus than half of Germany's inflation, reports Bloomberg.
"We are not happy" with the proposal, Carlos Bowles, vice president of IPSO, has commented to the aforementioned agency. "Given that inflation in Germany and the eurozone is likely to be around 8.5% this year, it means a substantial loss in purchasing power." If real wages are lower than the previous year, he added, "this is damaging the morale of the workers and also their confidence in the institution." In the event that the negotiations do not bear fruit, the possibility of a strike emerges, according to the Financial Times.
The friction comes as ECB officials scan the broader economy for signs of accelerating wage growth, something that could keep record euro zone inflation high for longer. The entity's president, Christine Lagarde, said last month that wage increases are "recovering", warning that a spiral of prices and wages would prove "counterproductive" and hamper the productive capacity of the economy.
Bowles, for his part, points to IMF staff research that faster nominal wage growth is not "necessarily a sign that a wage-price spiral is taking hold."
The ECB is not the only central bank where staff compensation has grabbed the headlines. Employees of Brazil's central bank have gone on strike this year over their wages, while little progress in improving pay highlights the challenge Bank of Japan officials face in reviving inflation and the economy.
While wages in Europe are rising amid record unemployment, workers have been unable to fully offset rising costs of living. The German union IG Metall reached a historic agreement with employers to increase their wages by 5.2% next year and 3.3% in 2024, in addition to tax-free bonus payments.
But Lagarde is not giving in, for now, even though the ECB staff union has previously tried to link wage increases to consumer prices. Her request was rejected and the president assured in May that the adjustments must be "reasonable." Bowles rejects the ECB's methodology for calculating salary increases that is based on the evolution of the national central banks of the euro area and other institutions of the European Union. She has also pointed out possible avenues of compromise.
"At least we want a negotiation on our salaries, but the ECB is not open to that," he has insisted to Bloomberg and has assured that the institution is not willing to approve non-financial proposals such as additional days of holiday at the end of the year. "If the ECB continues to reject a negotiated approach to finding a compromise, we will have to consider protest action early next year," Bowles threatened.
An ECB spokesman has declined to comment on the union's requests, saying the central bank's process "follows a pre-defined methodology" and "reflects the salary dynamics of comparable institutions" while applying to "all staff".
