Raising Wages Would Be 'Stupid,' Trichet Says

(Reuters) - European Central Bank President Jean-Claude Trichet warned on Sunday against raising wages in the euro zone as inflationary pressures heat up in the bloc.

"It would be the stupidest thing to do," Trichet told France's Europe 1 radio, asked about pressure in countries like Germany for wage rises as economies emerge from the economic crisis and as higher commodity prices fan inflation.

"We can't do anything about the current rise in fuel and commodity prices but we must do everything to avoid what we call second-round effects, the fact that other prices start moving and settle at a higher level than complies with our definition (of stability)," Trichet said.

"I am thinking of the whole range of other prices, including of course, salaries, and we say to employers and unions: remember that we are in a medium to long-term perspective, to maintain price stability."

Trichet was speaking the day after a Paris meeting of G20 finance ministers and central bankers where inflation was a key topic of discussion. ECB governing council member Christian Noyer commented there that pay demands should be limited.

Euro zone inflation stands at 2.4 percent, above the ECB's 2 percent target, and the ECB has warned that its inflation outlook could move to the upside.

Meanwhile German Chancellor Angela Merkel and Economy Minister Rainer Bruederle have called for bigger pay rises for workers in 2011 after unions accepted modest increases in recent years as Germany was battling with recession.

Trichet said inflation remained the ECB's top concern and noted that it was those countries in the euro zone that had kept a lid on costs that had managed to reduce unemployment.

The Spanish government, keen to convince markets of its long-term growth prospects, is pushing to de-link wage increases from inflation, something Germany wants to make the rule across the euro zone as part of a new competitiveness pact.

(Reporting by Catherine Bremer; editing by Sophie Walker)

Copyright 2010 Thomson Reuters. Click for Restrictions.

Comments

[NickTAZ]

10:36 AM on 02/22/2011

Hysterical-- the leader of Germany's, one of Europe's most "conservative" nations, is calling for wage increases for workers. Can you imagine any of our conservative legislators doing the same? More proof that even the most conservative parts of Europe are left of our moderate republicans.

[herkyc130]

12:34 AM on 02/22/2011

he says this is stupid to raise wages as he smiles and puts billions into his own pockets

[StuffMoreStuff]

12:25 PM on 02/22/2011

Thanks for making it clear that you don't have ANY idea what your are talking about.

[herkyc130]

11:14 PM on 02/22/2011

I know you like to bend over to stuffmore stuff

[nchriste]

09:45 PM on 02/21/2011

We know that JC Trichet has been putting his inflation paranoia above high unemployment and the health of countries in the European periphery. When ever you hear him say something this stupid then he shouldn't be taken seriously. Luckily he'll be gone from the ECB by the end of October. Hopefully the next president of the ECB will be on the side of sanity.

[jo smith456]

09:14 PM on 02/21/2011

Create jobs first.

[OSCPJ]

03:15 PM on 02/21/2011

Trichet is a lot more honest then Ben.  He has admitted a lot of things that Ben hasn't.  I would always choose to believe him before Ben.  And after Merkel.

[StuffMoreStuff]

12:25 PM on 02/22/2011

Isn't he though. thanks for reminding me why I fanned you.

[Computer Geek]

03:09 PM on 02/21/2011

So did he explain why it was OK that CEOs and Wall Street execs get huge bonuses and pay raises but it isn't OK for the bottom 98%?????? I'm still waiting for an explanation of how these guys are masters of the universe and Gomer Pyle at the same time...

[novictim]

01:32 PM on 02/21/2011

Eqypt is giving us an image of things to come...or at least I hope so.


The top 1% controlls 35-40% of the wealth. Had you heard this!

Our game of winner take all seems to be winding down. The wealthy class is now unassailable...they control the economic system and are the winners. They are like wealth vaccuum cleaners...ever bigger vaccuums leaving ever fewer crumbs. The game is now thoroughly rigged...forget about busting out.

The signs of a economic system failing us are everywhere in plain sight.

The wealthy suggest we start small business to achieve success...but our would be customers are broke. The middle class has more debt than wealth. Even the once wealthy doctors and lawyers have trouble making their ends meet...as they compete against the imported professional who will work for the ever lessening pay.

Now we're asked to cut the number of school days inorder to avoid raising taxes. Cannibalism!!

When will this end?

[noam4prez]

12:45 PM on 02/21/2011

The classic "free market" lie:

"We can't do anything about the current rise in fuel and commodity prices..."

[hershobr]

09:57 PM on 02/21/2011

What do you propose be done about it? Things aren't free.

[noam4prez]

01:04 PM on 02/22/2011

Despite the wall-to-wall propaganda we hear about the "free market", the price of many commodities are highly influenced by regulation and trade agreements, and many other factors within the control of policy-makers.

The reality is that there is no such thing as a free market. The major governments set the rules of the global economy through mechanisms like tariffs, exchange rates, interest rates, production subsidies, tax policy, and even diplomacy and warfare.

To say that "we can't do anything" is to deny all the actions of governments and global corporations that are going on all the time.

But of course that is the point of the statement: to deflect attention from the powerful interests that do indeed control our economy, and to focus on only one thing: workers, and how much they get paid.

[stape45]

12:06 PM on 02/21/2011

Some love to increase their gross by lowering our net.

[ProfessorMacphisto]

12:02 PM on 02/21/2011

Trichet went on to say "I don't mean MY wages, of course".

[AgingLady]

10:51 AM on 02/21/2011

Ever hear the saying 'you get what you payfor'? If you want smart employees, you have to hire smart people and pay a living wage. Otherwise, poorly paid people produce poor products which people eventually stop buying.

[blackranger]

11:26 AM on 02/21/2011

Cap oil prices, pure and simple hedge against inflation. Or (what a concept) we COULD wean ourselves off the oil that fuels inflation.

[AgingLady]

11:34 AM on 02/21/2011

I wish! I wish! I wish! Stop buying oil and go with the alternatives. Stop supporting wealth in oil countries and bring the money home.

[Indigo1941]

10:21 AM on 02/21/2011

Absolutely! Stealing from the poor is much smarter.

[WorkhelpWorkhelp]

02:04 AM on 02/21/2011

Good luck. Watch and learn....you'll both enjoy and hate this video. You'll see.
http://www.youtube.com/watch?v=swkq2E8mswI

[tercio]

12:55 PM on 02/21/2011

Great Vid, thanks. F+F for sharing it.

[babyspittle]

01:41 AM on 02/21/2011

yeah, because what would businesses do with more customers?
they certainly wouldn't hire?

[Tulka2]

12:28 AM on 02/21/2011

"Phooey" -Olive Oyl

Rich people hate inflation.  Same as it ever was.  It means their money isn't worth as much.  A poor man only pays a penny more for bread, but a rich man sees millions disappear.

[democrats for life]

03:41 AM on 02/21/2011

not actually, rich people invest in gold and silver as a hedge to inflation. they are making more money then ever, not losing it. if you are clueless, please don't post

[IMissAmerica]

07:58 AM on 02/21/2011

Sounds like you two should be on the same side, yet you still have to say something mean. I know times are stressful and it sucks reading about it every day, but try to play nice OK?

[Tulka2]

02:38 PM on 02/21/2011

Inflation is low.  The value of gold goes down in inflationary economies.  I stand by my statement.  I always stand ready to be corrected, but you have to show me something besides invective.

[OSCPJ]

03:17 PM on 02/21/2011

You hate the rich, but can't understand they can better survive by diversfying?  Look at the cause of the riots.  The other countries spend half of their income on food and energy.

[Tulka2]

03:48 PM on 02/21/2011

I understand the rich.  I understand that unless you make them invest in their own nation, it's a much more secure deal for them to hang a Cezanne on their wall than it is to start a factory that hires people.  I do understand which is the better deal for them if their only value is their own, personal, security.