The European Central Bank has chosen to maintain interest rates at their record high levels today, citing wage increases.
Real wages have fallen for two consecutive years while real profits have increased, so any objective assessment of inflation finds that it has been driven by profits not wages.
The real compensation of workers in the EU, which represents pay after inflation is taken into account, fell by 0.7 per cent in 2023.
That includes the European Central Bank’s own research which shows inflation has been driven primarily by corporate profits, particularly in the energy sector.
Despite that, windfall profits are still being overlooked by some policymakers who see working people as an easier target than corporations.
But persistently high inflation shows that is not the solution. In fact, they are making the situation worse by impeding growth and threatening jobs by killing off investment.
It is time the ECB dealt with the real cause of inflation and stopped causing more pain for the primary victims of inflation – working people who can afford less and less at the end of a tough week at work.
Responding to the ECB’s failure to lower interest rates, Esther Lynch, ETUC General Secretary, said:
“It’s time the ECB recognised that high interest rates are part of the problem in driving up prices and cutting into what workers can afford at the end of a tough week at work.
“There is no wage price spiral. Any objective assessment of the dynamics of what is at play in EU economies is that wages are not the driver for the increase in prices.
“Windfall profits are still an issue that is being overlooked in the causes of inflation.”
