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German pay hikes - not enough for ECB?

Wednesday, May 18, 2016 - 01:26

More than 3/4 million German construction workers are to get a bumper wage rise in the third major pay-hike agreement in recent weeks. But, as David Pollard reports, some in the euro zone - including the ECB - may wish they'd got more.

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As building work goes, this was more about politics than the economy. But since Germany reunified, it's also kept wages in check to restrain inflation and unemployment. The problem with a trio of new bumper wage deals could, though, be that they're not enough. (SOUNDBITE) (English) CITI EUROPEAN ECONOMIST, CHRISTIAN SCHULZ, SAYING: "They're moderate. They're good for the German economy because they support jobs growth. But for Europe as a whole, they're probably too low." Putting up new walls in Germany will still be more expensive. Three quarters of a million construction workers to get an extra five per cent. In other settlements, 3.8 million metalworkers and two million public sector workers will get almost as much. But if wage pressures are growing, inflation is not, either in Germany or the euro zone. (SOUNDBITE) (English) CITI EUROPEAN ECONOMIST, CHRISTIAN SCHULZ, SAYING: "In the medium term, inflation is likely to stay low. Growth, of course, can boost the prospects a little bit, and wage growth could do that too, but so far the movement is very slow - slower than the ECB expects, and that's why we expect the ECB to have to do more in terms of stimulus later this year and early next year." Reform, it's argued, is also needed - if difficult. France's attempt to free up its labour market still triggering mass demonstrations - and violence against the police. They too now reported to be joining the picket lines of striking workers - in protest at the pressure security forces have been under.

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German pay hikes - not enough for ECB?

Wednesday, May 18, 2016 - 01:26