German workers strike for wage hike as eurozone inflation skyrockets
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Growing numbers of German workers demand higher wages amid rising inflation, with some going on strike, leading economists to fear that widespread demands for higher wages could trigger a self-fulfilling inflationary spiral in the longer term. large economy of Europe.
German inflation peaked at 4.1% in 29 years in September, while in the 19 countries that share the euro, it accelerated to a peak of 3.4% in 13 years, according to official data released on Friday. Raised by the surge in energy prices, this rate is higher than the expected 3.3% rate.
Most economists believe eurozone inflation will hit 4 percent by the end of this year, double the European Central Bank’s target, but then subside next year. This also remains the main message to this day from ECB President Christine Lagarde.
However, such predictions could turn out to be wrong if higher prices lead to widespread wage increases that push inflation further.
In one example this week, workers at German motorhome maker Carthago went on strike over wage concerns, demanding their share of the loot from an increase in orders thanks to an increase in “stays” fueled by the pandemic. .
“Inflation in Germany continues to rise,” said Frederic Striegler, an official at the country’s largest union, IG Metall, explaining his demand for a 4.5% pay rise and additional early retirement funds for wood and plastic workers in Carthago and other companies in the Baden-Württemberg region of southern Germany.
“The RV industry has received so many orders and profits and the employees just want a piece of the pie,” Striegler said, adding that more strikes are scheduled in two weeks at RV manufacturers and of caravans, as well as furniture companies across the country.
The unions are making similar wage demands for German workers in other fields, such as banking and the public sector. This week, retailers and mail order companies in the Hessian region agreed to increase their workers’ wages by 3 percent this year and an additional 1.7 percent in April next year.
“The story that German wage deals have performed well this year is history,” said Carsten Brzeski, head of macro research at ING. “The latest announcements show that unions are entering into upcoming negotiations with demands tied to current inflation figures, not inflation expectations.”
Rising energy costs and supply chain bottlenecks are driving inflation up, which has driven up shipping costs and left manufacturers strapped for everything from steel to semiconductors. Lagarde said on Wednesday: “How long will these bottlenecks take to clear up is a question we are watching very closely and it is on our radar screen.”
Another potentially inflationary factor is that unemployment continues to fall both in Germany and across Europe, and more companies are reporting labor shortages. The European Commission said the proportion of construction companies saying a shortage of workers was limiting their activities reached a record 27% in its latest survey.
The German association of freight transport and logistics companies has warned of a shortage of more than 60,000 truck drivers, which is expected to increase by 15,000 per year as more drivers retire than they do. are formed.
However, according to Allianz economist Katharina Utermöhl, the wage demands of German unions are still lower than those they made before the pandemic. who said: “We expect wage demands to remain under control for the time being.”
In addition, the country Kurzarbeit The leave scheme supported the wages of just under a million people in July, but it is expected to be cut at the end of the year. Utermöhl said this meant that “the current record pace of recovery in the labor market is likely to slow in the coming months”.
As central bankers debate the “transitional” nature of the latest surge in inflation, they are watching with particular interest the development of wage negotiations in Germany and elsewhere. Lagarde said the ECB would “look very carefully” at this, adding: “At the moment we certainly don’t see any widespread contamination of these price increases in wages. “