Europeans cannot perceive it because the cost of living has skyrocketed, but the truth is that salaries in Europe are experiencing an upward cycle, as indicated by the data released today by the European Central Bank (ECB). In the third quarter of 2024, negotiated salaries (the ECB makes the calculation based on what appears in collective agreements) in the eurozone increased by 5.42% compared to the same period in 2023, marking their largest increase since first quarter of 1993, when the increase was 5.62% in interannual terms.
Thus, salaries in the eurozone continue with the strong trend that began after the Pandemic, in the third quarter of 2022. So the increase was 3.02%and from there the indicator continued to improve (with a slight moderation in the second quarter of this year) until reaching this record figure in July-September 2024.
The data is important because it is one of the indicators that the European supervisor takes into account in its monetary policy, which is now focused on encouraging growth, yes, but also on combating inflation. We must not forget that after carrying out the third rate reduction this year, which left the principal (deposit facility) at 3.25%, in October the president of the ECB, Christine Lagarde, warned that They will not consider the battle won until the price increase stabilizes at 2%.
Precisely, yesterday it was learned that in October Inflation in the eurozone experienced a rebound, reaching 2%three tenths above the price increase observed in September.
Well it is true that Salary increases provide relief to citizens, even more so in a context of accumulated inflation, But the problem, as has already been mentioned, is that a rapid wage increase can end up putting upward pressure on the CPI, because there is more consumption and because companies’ labor costs increase, among other things. In a note dated September 12, the ECB warned that towards the end of the year “inflation could be higher than expected if wages or profits increase more than expected.”
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