Volkswagen has agreed a substantial wage hike for its workers. The 3.2 percent pay rise for around 100,000 employees makes it likely other German unions will gain similar inflation-busting increases this year.
The IG Metall union at VW did not get the 6.0 percent rise it wanted, but the 3.2 percent increase will add to the concerns of policymakers about rising inflation in the euro zone.
In January euro zone inflation hit 2.4 percent. That was above the ECB’s target of “close to but below 2.0 percent” for the second month running. In the same month, German inflation hit 2.0 percent.
ECB policymakers say they expect inflation to subside by the end of the year, but they have stepped up their warnings that interest rates will have to rise if it does not.
A wage-price spiral, where buoyant economic conditions and rising prices push workers to ask for higher pay, would be a major concern for central bankers intent on controlling inflation.