It's a beacon of hope.

Wage growth in the euro zone should be "very strong" in the coming year, exceeding historical benchmarks and partly catching up with the unbridled inflation since 2021, according to an article from the European Central Bank (ECB) published on Monday.

"Wage growth in the coming quarters should be very strong compared to historical trends," say the authors of an article published in the monthly bulletin of the monetary institute.

This growth will reflect "some catch-up between wages and the high rates of inflation" observed since 2021, they note.

In the euro zone, the annual rise in consumer prices certainly fell below the symbolic bar of 10% in December after a year and a half of uninterrupted rise.

But the work of undermining prices on wages means that to date "real wages are much lower" than in 2019, "before the pandemic" of Covid-19, explain the authors.

Good job market health

In the second quarter of 2022, the real annual growth rate of wages was negative, at -5.2%, in the euro zone, according to their article.

This could lead unions to “demand bigger wage increases in future rounds of bargaining,” especially in low-wage sectors, the authors add.

In Germany, the Verdi services union is currently demanding a 15% increase in wages for the approximately 160,000 employees of the mail giant Deutsche Post, and 10.5% for the 2.5 million federal state employees. and municipalities.

The strong future wage increases will also reflect the good health of the job market, despite the slowdown in the economy, notes the ECB.

Gross wages in the euro zone are expected to have increased by 4.5% in 2022 and are expected to grow by 5.2% this year, according to the latest ECB forecasts.

A “wage-price” spiral

In an interview with

Le Monde

, published on December 22, the Vice-President of the ECB, Luis de Guindos, said he expected inflation to catch up "normally", but ruled out "for the moment" a "wage -price” which would be harmful to bring inflation down to 2%, the ECB's target.

In the medium term, “downward pressure” will again affect wage growth due to the economic slowdown and uncertainty amid the Russian war in Ukraine, conclude the authors of the ECB article.


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