However, wage increases are also attributable to the materialisation of second round effects where nominal wage indexation schemes are linking wages to past price developments. The Governing Council of the ECB has repeatedly expressed its concern about the existence of such schemes and called last week for these schemes to be abolished.
They basically set in motion second-round effects potentially leading to a wage-price spiral which would be detrimental to employment and competitiveness. Let me re-assert that the ECB is monitoring price-setting behaviour and wage negotiations very carefully. Broad-based second-round effects must be avoided and medium to longerterm inflation expectations must remain firmly anchored at levels below but close to 2%.