Where the European Central Bank demands that wages not rise too fast, the institution wants the wages of its staff to rise semi-automatically in line with inflation. “Thank goodness I finished my cup of coffee, otherwise the coffee would fly in all directions,” says macroeconomist Edin Mujagic.
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The economist argues that if the ECB adheres to the plan, credibility will become ‘less and less’. “It gets bitter when you hear members of the ECB’s board of directors repeatedly telling unions not to impose wage demands that are too high.” Mujagic also refers to the interview of Klaas Knot, CEO of De Nederlandsche Bank, in Buitenhof. ‘He said if wage demands get too exuberant, it could lead to a recession. He’s right about that.’
“When the war started, there were a few shootings here and there, but not enough to fight inflation”
Mujagic understands that unions set high standards. ‘I understood very well that the ECB does not want to talk about this. Because when you talk about it, you have to say that the unions have lost faith that the ECB will protect their supporters from long overdue inflation. Because according to Mujagic, high wage demands are not the cause of an imminent recession, but the policy of the ECB itself. ‘Firstly it has said for a long time that inflation would explode, even when other central banks had come to the conclusion that this was not the case. However, the ECB continued to believe in that fairy tale. Subsequently, the ECB started the war on inflation too late. When the war started, there were some shootings here and there, but not enough to fight inflation,’ says Mujagic. “Then you risk your credibility.”
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
