The European Central Bank (ECB) employees are not happy with the planned salary increase at the regulator.

Primarily because what they consider too meagre a wage step lags far behind inflation, employees have to eat away at their purchasing power, according to the ECB staff union IPSO.

According to the ECB’s proposal, wages for staff will rise by 1.5 percent from 1 January, followed by a wage increase of more than 4 percent a year later. But, according to IPSO, wage growth is far from keeping up with the rise in German consumer prices. Around 3,500 people work at the ECB throughout Europe. The head office is in Frankfurt.

“We are not happy with the proposal,” said Carlos Bowles, Vice President of IPSO. “With inflation in Germany and the eurozone likely to be around 8.5 percent this year, this represents a significant loss of purchasing power.” Due to high inflation, the call for higher wages is getting louder as the high costs erode purchasing power. Employers, in turn, try to maintain profit margins by passing on the higher wages in prices, resulting in higher prices, the so-called wage-price spiral.

According to ECB boss Christine Lagarde, vigilance is needed in this area. She said last month that wage increases are “picking up” but warned that a wage-price spiral would destroy the economy and hamper the economy’s productive capacity.

Bowles, in turn, points to research by the International Monetary Fund (IMF). This showed that faster nominal wage growth is not necessarily a sign of a wage-price spiral. But, according to Bowles, the ECB is also not open to negotiations about wage increases and other working conditions.

An ECB spokesman did not comment on the union’s demands to Bloomberg news agency. It was emphasized, however, that the central bank has a “predetermined methodology” in which wage development is equal to comparable institutions and applies to all employees.