Luis de Guindos, vice-president of the European Central Bank (ECB), argues that unions should moderate wage demands given the rise in prices so as not to “feed” the inflation curve.
“The unions [da zona Euro] tend to demand exorbitant wage increases. We have to be careful”said Luis De Guindos, Vice President of the ECB, in an interview released this Thursday by the German daily Suddeutsche Zeitung.
‘We must avoid a spiral between wages and prices’he stressed, adding that “nobody wins” when an inflationary move is triggered because of salary increases.
“If we end up in a spiral between wages and prices, the ECB will have to raise interest rates more than it otherwise would have done”he said, noting that the situation could raise credit costs “even more.”
The former Minister of Economy in Spain’s People’s Party government (2011-2018) suggests that it is up to the government to support purchasing power “through the introduction of specific support to mitigate the impact of inflation”.
“That way people can lower wage demands and the ECB doesn’t have to tighten monetary policy so much. This would be a win-win situation.”he said.
For the vice president of the ECB, the “wage spiral” could “hamper the ECB’s efforts” at a time when inflation in the eurozone is beginning to slow.
Inflation fell from 10.4% in October 2022 to 8.5% in January, for the third consecutive month, according to the ECB, thanks to a “calm” in energy prices and the unblocking of supply chains.
Still, Luis de Guindos defends that one should not be wary because, he adds, the reopening of the economy in the People’s Republic of China, after the health restrictions, “is leading to an increase in the demand for energy, metals and goods. pressure on prices”.
Inflation in Germany rose slightly in January.
The ECB has reacted dramatically to monetary policy, raising interest rates five times since July 2022 – an unprecedented pace.
The ECB’s goal is to curb consumer demand and, in particular, to curb price increases.
Following a likely 0.50 point hike in key rates at the next ECB meeting in March, “further rate hikes cannot be ruled out,” the ECB vice president added.
Source: DN
