AP News, June 14th, 2007
Labor costs in the 13 nations that use the euro rose 2.2 percent in the first three months of 2007 compared with a year ago, the European Union's statistics agency said Thursday.
The Eurostat agency also confirmed May inflation held steady at 1.9 percent, signifying that wages are now growing ahead of inflation.
The wage part of total hourly labor costs in the first quarter climbed 2.3 percent from the same period in 2007, Eurostat said. Inflation rose by around 1.8 percent during the first quarter.
Germany, the EU's largest economy, saw the lowest labor cost increase at just 0.1 percent during the first quarter.
Eurostat said higher prices for restaurants, cafes and tobacco were the biggest factors pushing up inflation, while telecoms and transport fuel fell from a year ago.
Spain had the highest inflation in the euro area _ at 4.1 percent _ and Finland the lowest at 1.7 percent. Germany and France were above the average at 2.1 percent and 2.4 percent.
Among the newcomers to the EU, Bulgaria posted inflation of 9 percent and Romania 7.3 percent. Poland posted the lowest increase at 1.5 percent.
The European Central Bank closely watches inflation before it decides whether to raise interest rates. Earlier this month the central bank hiked rates by a quarter percentage point to 4 percent. The European economy is currently enjoying its fastest rate of growth since 2000.
However, ECB President Jean-Claude Trichet did warn that higher-than-expected pay demands could see inflation rise beyond the guideline as more money in the economy leads to price increases.
Trade unions have countered his analysis as "seriously flawed," saying wage agreements do not pose any threat to inflation and he should watch excessive interest rates and the high rate of the euro against other world currencies.
In the 27-member European Union, labor costs went up 3.7 percent over the quarter. After Germany, labor costs increased the least in the region's smallest economy Malta at 1.4 percent and Belgium at 2 percent.
The highest labor cost rises were in the eastern European nations that are rapidly catching up to the EU average. Latvian costs rose 32.6 percent while Romania _ which joined the EU on Jan. 1 _ climbed 25 percent. Lithuania went up 22.2 percent and Estonia 21.1 percent.
