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Near-Record Inflation Tests Belgium’s Automatic Wage Indexation

  • Rules extend beyond public workers to cover most private firms
  • Central banks warn indexation can lead to wage-price spirals

Belgium’s almost unique wage-hike system is being put to the test as spiraling inflation pushes the country’s salaries above its neighbors, threatening its competitiveness. 

The sixth-largest euro-area economy may see public and private wage costs jump as much as an unprecedented 12% over the next two years, as forecast by the National Bank of Belgium, driven by inflation that has surged to a near 40-year high. This is a strain for a country that relies on exports for four-fifths of its gross domestic product.