In an ECB press conference on 10 January, Trichet said that a moderation of the present high inflation rates towards the end of the year could only materialise if "recent oil and food price dynamics and their impact on HICP inflation do not have broadly-based second-round effects on wage and price-setting behaviour". In December 2007, the yearly inflation rate reached 3.1%.
Trichet expressed concern that "risks to this medium-term outlook for price developments [...] include the possibility that stronger than currently expected wage growth may emerge, taking into account capacity constraints and the positive developments in labour markets." He added that "any indexation scheme of nominal wages to prices should be eliminated".
Following similar remarks by Trichet last Saturday, the European Trade Union Confederation (ETUC) urged the ECB to "stop its crusade against fair wages". ETUC Deputy General Secretary Reiner Hoffmann affronted the Frankfurt-based bank by declaring: "The ECB is attacking collective bargaining and fair wages to hide the fact that its Board is apparently unable to provide a policy response to appreciation of the euro exchange rate and the sub-prime financial crisis by cutting interest rates."
According to the ETUC, the assumption that oil price hikes will trigger a wage-price spiral is wrong for two reasons:
- "With hourly wages growing at only 2.6% and with the share of wages in total income continuing to fall, stronger growth in wage earnings does not represent an inflationary danger," and;
- "with an overvalued euro exchange rate and with the financial system still caught in the sub-prime turmoil, the euro area needs robust wage growth to keep driving economic growth and job creation."
In Germany, the EU's economic heavyweight, sectoral trade unions are demanding 8% wage raises for officials and workers in the steel sector. Chancellor Angela Merkel from the conservative CDU, as well as Labour Minister Olaf Scholz and Finance Minister Peer Steinbrück from her Socialist coalition partner, the SPD, have recently spoken out in favour of wage rises.