Four in 10 leading companies in the Eurozone have stated that they expect employees to demand higher wages as a result of a rise in the cost of living caused by the Iran war, a European Central Bank (ECB) survey has found.
The ECB quarterly survey states that wage growth is expected to slow to 3 percent this year and 2.9 percent in 2027 from 3.2 percent last year.
“Consistent with this, around 40% of contacts thought that the uptick in inflation caused by the conflict in the Middle East would result – or risked resulting in – higher wage demands,” the Oct. 30 report reads.
This is up from 20 percent from the previous survey. However, most, “citing the subdued economic conditions and employment outlook,” said they did not anticipate any notable impact on wage growth.
These findings were gathered between Sept. 28 and Oct. 7 from 64 leading non-financial companies operating in the eurozone.
The eurozone is the economic region within the European Union made up of 21 of the 27 member states that use the euro currency.
With its heavy reliance on energy imports—making up nearly 60 percent of its energy consumption—it has been particularly affected by disruptions to oil, gas, and other shipments through the Strait of Hormuz, a critical route that handles approximately one-fifth of the world’s oil traffic.
ECB Holds Interest Rates
The survey results came a day after the ECB announced that it was leaving interest rates unchanged.
The central bank said in an Oct. 29 statement that its governing council had decided to keep its three key interest rates at their current levels.
The deposit facility, the main refinancing operations, and the marginal lending facility will leave their rates at 2.5 percent, 2.65 percent, and 2.9 percent, respectively.
The ECB said that while the effects of the energy shock continue, underlying inflation has so far remained broadly stable.
ECB President to Step Down
Hours before the ECB was due to publish its latest monetary policy decision, its president, Christine Lagarde, announced that she would be stepping down on Feb. 7, 2027, following the Governing Council’s Feb. 3 to Feb. 4 monetary policy meeting.
In a video message posted to social media, Lagarde said she told fellow policymakers and ECB staff that she would step down following the Governing Council’s monetary policy meeting on Feb. 7.
“I leave this institution with a sense of good work done and an ECB that is fit for the future,” she said.
The ECB stated that Lagarde had informed European Council President Antonio Costa of her decision. The European Council, which is made up of the heads of government of the 27 member-states, will appoint her successor through the official process set out in EU law.
Costa confirmed that the process to appoint Lagarde’s successor would begin immediately to ensure a smooth transition.
Under EU rules, eurozone countries first put forward candidates to lead the ECB. After consultations with EU finance ministers, the European Parliament, and the ECB Governing Council, the European Council appoints the new president.
The decision requires broad backing from eurozone governments; at least 16 of the 21 countries, representing 65 percent of the euro area’s population, must vote in favor.
Evgenia Filimianova contributed to this report.
