Public-sector trade unions are threatening to strike as inflation reduces real wages altogether.

Statistics show that average salaries in the first quarter increased 7.2% faster than last year, but real wages have actually fallen in most sectors due to inflation. The hardest hit was in the public sector, where real wages fell 8.4% in four months.

After meeting with the government, Joseph Stedura, head of the Czech Trade Union Federation, said executives’ proposals to cover the surge in inflation were completely inadequate.

“We’re not asking for a salary increase, we just want to keep their purchasing power. Unfortunately, none of the government’s proposals were close to that.

“The” best “proposal we’ve heard means that real wages for employees in the public sector who haven’t received a salary increase so far this year will drop by 7.5%. For those people, that would still mean a decline in their real wages. And that was the best offer we got. “

The next day, the public-sector trade union announced that it was ready for a strike. So far, Labor Minister Marian Juretica remains calm, saying the government is ready to raise salaries, but not high enough to cover inflation.

Doing the latter means adding 20 billion koruna from the budget, the Minister of Labor said. The government wants to avoid this year’s planned budget deficit, given that it is already at CZK 220 billion.

The government is not alone in satisfying trade union demands. Some economists and business representatives have warned that raising wages at such high rates only creates more risk in the inflation spiral.

Prime Minister Petr Fiala reiterated this opinion on Tuesday, stating that the government’s main task is to try to curb inflation as much as possible.

“If we raise salaries very high, following all trade union suggestions, we would be in a situation where we would raise wages for one group, but as a result, everyone’s savings would be further devalued and the actual value of wages would be reduced. The general will fall further. “

There is a prospect of owning a house as well as the savings of those who have been hit. Mortgage rates have peaked in more than a decade due to the Czech National Bank’s sharp rises in interest rates over the past year. This is a phenomenon that economist Štěpán Křeček believes will also affect the construction sector.

Amid these concerns, much attention has been paid to the Czech National Bank, which will welcome its new president next month. Jiří Rusnok, the current head of the country’s central bank, has already supported raising interest rates since last year. His successor, Aleš Michl, now wants to stabilize prices.

The Michl faction is currently a minority in the banking council, but this could change after President Milos Zeman nominates two new members this Wednesday. The president has kept his choice secret so far.

Many analysts expect inflation to peak in June or July, when inflation can exceed 16%. Central bank interventions play a very important role in managing this phenomenon, but economists emphasize that the key to trend development is external factors such as rising energy prices.