Inflation 4.6%, government refuses to index wages

Months ago, the Albanian government declared that once there was evidence that inflation was increasing, it would index the wages of state employees. However, now that inflation has arrived, it appears the government will not follow though on their previous commitment. When the government met on Wednesday, The Minister of Labour, Social Affairs, and Equal Opportunities presented a draft decision to not index wages at this time. However, independent experts and the Socialist opposition were calling for the indexing of wages. The draft foresaw the future indexing of wages up to 3.1 percent. Even that was not going to be enough to counter the effects of inflation and preserve the purchasing power of state employees. Inflation rose last month by 4.6 percent, compared to March 2007. However, the government decided to postpone the decision to index wages and to monitor the situation for another six months. The government decision, if approved, will have significant fiscal effects in lost wages placed at ALL 175 million each month or ALL 1 billion for the next 8 months. The Minister of Finance, Ridvan Bode is reported to have ‘vetoed’ the indexing draft. Surprisingly, the Minister of Internal Affairs, Bujar Nishani, supported Bode and argued that the decision to index wages should be made in autumn. In practice, with this decision the government has decided to freeze the wages of state employees.