European Central Bank staff will discuss protest action and even potential strikes after rejecting a pay offer well below the rate of eurozone inflation, a union official has warned.
The ECB’s proposal to increase pay 4.07 per cent in January is consistent with its own opposition to deals that link wages to inflation that it believes risk fuelling a damaging wage-price spiral.
But its latest pay offer, up from a 1.48 per cent rise at the start of this year, is less than half what annual eurozone inflation is expected to be this year and will leave its staff with a significant pay cut in real terms.
“People are losing faith in this institution,” said Carlos Bowles, vice-president of the Ipso union that represents ECB staff. “What the ECB leadership is telling us is ‘sorry we missed our own inflation target and now you, the staff, are going to pay the price’.
“We really see an issue in the way the ECB stance is damaging the bargaining power of workers,” said Bowles. “This is playing a role in increasing inequality.”
A recent survey by the union found “the vast majority of colleagues are angry” about the ECB’s pay offer, he said. “The pay consultation is due to finish at the end of the year and we will decide in January if we protest.”
The union met ECB president Christine Lagarde a few weeks ago and she made it clear there was no room for negotiation, he said. A strike, as happened at the ECB over pension reforms in 2009, was “not excluded” but it would only “come after an escalation curve”.
Staff at the Brazilian central bank went on strike earlier this year in protest over pay. But strikes are difficult to organise at the ECB because it is not subject to any national law and operates under its own rules, including a “minimum service obligation” for staff, which is decided on a case-by-case basis.
The dispute puts the ECB in a difficult position as it prepares to raise interest rates for the fourth consecutive time at its meeting next week to try to tame the biggest surge in inflation for a generation.
“It’s awkward, to say the least,” said Erik Nielsen, chief economics adviser at Italian bank UniCredit, adding that it put the ECB in “between a rock and a hard place” as it tried to fight inflation and keep its staff from turning against it. “The symbolism is just awful.”
The ECB said it has “a regular, yearly salary review . . . which follows a predefined methodology” and “reflects the wage dynamics of comparator institutions,” including the 19 euro area national central banks, the European Commission, the European Investment Bank and the Bank for International Settlements. “It applies to all staff,” it said.
Eurozone inflation hit double digits in October for the first time in the 23-year history of the single currency after Russia’s invasion of Ukraine caused a surge in energy and food prices.
In November, eurozone inflation dipped for the first time in 17 months to 10 per cent, which is still five times higher than the ECB’s target. Over the whole of this year, the ECB has predicted inflation will be 8.1 per cent and it is likely to lift this forecast further next week.
Wages in the single currency bloc have not kept pace with inflation, eating into the spending power of households and prompting economists to predict a recession this winter. Hourly labour costs in the eurozone rose 4 per cent in the year to the second quarter, according to Eurostat, the EU’s statistics agency.