The question of pay restraint in a time of inflation has reached the ranks of the European Central Bank, which has launched a staff wage review that will consider proposals for semi-automatic salary increases when prices rise.
Union officials requested the review after contesting this year’s pay award of just over 4 per cent by the ECB, which left employees with a real terms pay cut after inflation averaged 8.4 per cent in the eurozone last year.
The wage offer was double the ECB’s inflation target and is in line with wage growth across the eurozone.
The dispute puts the ECB in an awkward position after it raised interest rates for the seventh time in a row last week to try to tame the biggest surge in inflation for a generation, while urging workers and employers not to drive wages and prices up too far.
Carlos Bowles, vice-president of the Ipso union that represents ECB staff, told the Financial Times it was “asking for a more balanced approach” for setting staff pay, such as “the one in place at the European Commission”.
The pay of EU employees rose 6.9 per cent this year, with part of the increase determined by an automatic adjustment mechanism that is designed to maintain the relative purchasing power of civil servants across Europe. About 2.5 per cent of the increase was also down to a payment delayed from 2020.
ECB president Christine Lagarde on Thursday repeated her earlier warning against a “tit-for-tat” dynamic in which workers and employers try to avoid losses from rising inflation by pushing up wages and prices.
She said this would increase the “risk of something that is much more difficult” by keeping price pressures elevated and requiring “more active measures in monetary policy”.
The central bank’s current methodology for adjusting the pay of all its staff is based on wage dynamics at the 20 euro area national central banks, the European Commission, the European Investment Bank and the Bank for International Settlements.
The 4.07 per cent pay increase it introduced from January compared with a 1.48 per cent rise a year earlier, when eurozone inflation was 2.6 per cent. The ECB said staff turnover was only 1.3 per cent last year, suggesting most employees were not too dissatisfied.
The union is in dispute with the ECB over claims the central bank did not follow its existing methodology correctly. The staff committee, which is elected by all employees and on which Ipso has six of nine seats, also launched an internal appeal against the calculations behind the 2022 offer, which was signed by 373 employees. Bowles said the appeal was “the first step which paves the way for a court case, which we will do for sure”.
The ECB said: “Every three years a review of the general salary adjustment can be requested by a stakeholder. Last year a recognised trade union asked for it — so this year a review is taking place. Decisions on the GSA are taken by the ECB governing council.”
The review — only the second in the ECB’s history — is expected to last beyond the end of this year, by which time it predicts annual inflation will have fallen from 7 per cent in April to below 3 per cent, meaning any pay rise is likely to be smaller, regardless of the methodology used.
The ECB said: “While we respect diversity of views, Ipso does not necessarily represent the majority view of ECB staff.”
The European Commission said its annual adjustment of EU staff pay was “calculated by Eurostat based on the evolution of national civil servants’ purchasing power”.
If inflation exceeds a certain level in Belgium and Luxembourg, the commission can also give EU staff a mid-year pay rise that is backdated to the start of the year.
Source: Economy - ft.com
