Living costs crunch prompts Europe-wide strike threats

Price rises, and consequent constraints on living standards, are pushing trades unions into confrontation with management in many countries.

A wave of strikes has swept across Europe, from the "new Europe" of Slovenia and Romania to the "old Europe" of France, Italy and Germany in recent months.

Consumers are being squeezed between rising gas, electricity and mortgage bills, and rocketing food prices in staples such as bread, eggs and dairy goods.

But 18 months ago voices in some quarters, in politics as well as in some economic circles, were arguing that there was little sign of consumer price inflation.

However, property prices were coming near to the peak of a boom, as is now recognised, and the impact of demand for raw materials from emerging economies such as China was beginning to be felt, in the price of energy and steel, for example.

Other commodity prices have since risen sharply, and most remarkably the price of foodstuffs.

"The cost of food has gone up so much, even those who can afford it have begun to notice," said one mother in Milan during a so-called "pasta strike", or Italian consumer boycott at the end of last year

The price rises have now been confirmed by official statistics. Inflation in the eurozone reached a 12-month record of 3.5 per cent in March, the highest figure since the creation of the zone in 1999.

But although inflation has been ignited by rising energy and food costs, average salaries have increased by only 2 per cent this year.

Consequently, employees are demanding higher pay rises and trades unions are complaining of a shift in wealth from pay-packets to company profits, saying that there is an extension of low wages and job insecurity.

The European Trade Union Confederation (ETUC) organised thousands of demonstrators to take to the streets of Slovenia on Saturday, demanding higher salaries and a minimum wage in those EU countries yet to have them.

Purchasing power now centre-stage in European elections

In France, where President Nicolas Sarkozy campaigned on a platform of being the "candidate of purchasing power", conflicts are multiplying both in the private and public sectors. Among companies affected are the PSA Peugeot Citroen auto group, L'Oreal cosmetics, Safran aerospace, LCL and BNP Paribas banks, and the Air France airline.

And that's without counting sectors which never strike, such as the large retailers, whose cashiers often bring home less than 1,000 euros ($1,570) a month net, "a poverty-wage which doesn't even last past the tenth of the month," according to one such employee of the Carrefour hypermarket chain in the southern port of Marseille.

Germany has broken with its traditional "social consensus" model, with a succession of major strikes in sectors such as the civil service, steelworkers and train drivers, after years in which wage-earners had to tighten their belts under the labour reforms introduced by previous Chancellor Gerhard Schroeder.

In a recent opinion poll, 43 per cent of Germans said they were willing to demand a 10-per cent pay increase, knowing that civil servants had won 8 per cent over two years, steelworkers 5.2 per cent and train drivers 11 per cent.

Private-sector wages rose by 2 per cent in Germany last year, and stagnated in the public sector. More than 15 per cent of wage-earners take home a gross pay of less than 7.5 euros an hour, according to the country's employment minister.

In southern Europe, purchasing power has taken centre-stage in election campaigns. In Spain and Italy, it has particularly highlighted the plight of young graduates often paid around 1,000 euros a month with precarious terms of employment, and thus – unable to afford accommodation – having to live with their parents.

And the retired are protesting, with a demonstration in France in March against a sub-inflation rise in the state pension of 1.1 per cent. On the march one pensioner, 80-year old Aliette, said she had had to take out her first ever loan, to pay for a new boiler.

And in eastern Europe, long attractive to foreign companies for its low-wages, the cost of living is rising, as shown currently by a wage strike at Renault auto's Romanian subsidiary, Dacia.

"You can't condemn Romanian workers to live forever on poverty wages," criticised the former reforms minister Ilie Serbanescu.

But Jean-Claude Trichet, the head of the European Central Bank which sets interest rates in the eurozone, insisted at the end of March that the bank would not relax monetary conditions to compensate for a loss of buying power.

Referring to policies by several governments in Europe to feed wage increases after the oil shocks in the 1970s, he said: "If we don't learn the lessons of the past, we will find ourselves faced with the same problems."

The policy responses in the 1970s had fed inflation, choked growth and caused mass unemployment for decades, he warned. (AFP)