When the German central bank’s chief economist last week seemed to give the all-clear for the country’s labor unions to push employers for higher wages, he likely had little idea what a ground-breaking debate he would be starting.
And yet, perhaps this was exactly Jens Ullbrich’s intention. After more than a decade of telling them to hold back, the Bundesbank is now looking to labor to help solve the crisis in the euro zone, creating an unholy alliance between one of Germany’s most conservative institutions and the traditionally left-leaning labor movement.
Last week, Bundesbank officials met with the leaders of Germany’s largest labor unions, many of whom are in the middle of negotiating with employer unions over new wage contracts for this year. Mr. Ullbrich told Spiegel magazine after the meeting that unions should feel free to push for wage increases in the order of 3-3.5 per cent. That would be well above the inflation rate, which is around 1 percent, and means workers would have plenty of extra spending money in their pockets.