ETUC invites the European Central Bank to apply a moratorium on further interest rate hikes
Fearing inflationary pressure from ‘higher than expected’ wage developments, the ECB has been engaging over the past one and a half years in a series of interest rate hikes. Another increase, bringing interest rates to a level of 4%, is scheduled for 6 June.
However, the assumption on which the ECB bases this policy is seriously flawed: recently concluded collective bargaining agreements in the euro area, with IG-Metall as a prime example, do not pose a threat to inflation by any means. The real danger for the recovery is not that of too high wage outcomes but of excessive interest rates together with a too expensive euro exchange rate. The ETUC urges the ECB to implement a moratorium and stop the policy of hiking interest rates in the coming quarters.
Says Reiner Hoffmann, Deputy General Secretary of the ETUC: “Trade unions in the euro area are sending out the signal to the ECB that their wage bargaining strategies are stability oriented. The ECB should honour this by deciding on a moratorium on further interest rate hikes.”
Annexe: ETUC Collective bargaining bulletin 2007/3
Note to editors
The IG- Metall wage agreement: No danger to price stability whatsoever
As analysed in the note attached (ETUC Collective Bargaining Bulletin March 2007), the new collective bargaining agreement in the German metal sector:
does not result in a noticeable acceleration of nominal wages, with average monthly wage growth going from 3% in the previous agreement to 3.17% in the new agreement;
links up again with rather moderate wage growth over the 2008 calendar year.
If wage growth over the medium run remains limited to 2 or 2.5% in what is one of the most competitive and profitable economies in Europe, then the danger of inflationary wage developments in the euro area is not real but imaginary.
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