especially for the euro area ( figure 12 ). figure 12 : nominal wage growth figure 12a : euro area figure 12b : ireland source : ecb and central bank of ireland. cpe is growth in compensation per employee ( cso ) ; negotiated wages is from the ecb - sdw ; ehecs wage growth is from the cso ; and iwgt refers to the ‘ indeed wage growth tracker ’ ( see adrjan & lydon, 2022 ). these wage growth forecasts underpin the underlying ( core ) inflation projections, for both ireland and the euro area. if wage growth turns out to be weaker, then we may see a faster decline in core inflation than currently envisaged. if it turns out to be stronger, then the core inflation will prove stickier. how is it that core inflation is projected to decline, even in the face of historically high wage growth? the answer is that other factors are expected to exert downward pressure on core inflation over the projection horizon, falling input costs from non - labour factors as supply chains normalise, lower profit margins and rising labour productivity. to conclude, i want to outline what i see as the key risk factors around these wage projections. on the upside, i see two potential upside risks. one is a more resilient labour demand. and to monitor this i will be closely following both employment growth and job vacancy statistics. the second is inflation expectations – not something i have paid attention to in my speech today, but nonetheless important. the experience of the 1970s taught us the importance of inflation expectations for wage and price dynamics. in the euro area, expectations increased with the recent surge in inflation, although recent data points to a gradual return to our 2 per cent target for short - term consumer inflation expectations, and medium - term expectations remaining anchored around our 2 per cent target. the anchoring of medium - term expectations plays an important role in our projected disinflation path. on the downside risks to wage growth, i primarily see one : downside risks to economic growth itself. as we saw in the historical analysis of vacancy - unemployment dynamics, a longer and deeper slowdown could lead to a bigger increase in the unemployment rate, which will put downward pressure on wages. to monitor this, i will be paying close attention to monthly unemployment dynamics, softer indicators such as pmi employment expectations, and wage trackers, such as that developed at the central bank of ireland in collaboration with indeed

sharon donnery : the debt dangers remarks by ms sharon donnery, deputy governor of the central bank of ireland, at les rencontres economiques d ’ aix - en - provence, virtual, 2 july 2021. * * * the covid - 19 pandemic is a public health emergency that requires substantial state intervention to save lives. 1 there is broad agreement that the resulting increase in government debt to support public health, the economy and households was warranted. however, as we emerge from the worst of the crisis, the global debate on the appropriateness of elevated public debt levels has reignited. while i will briefly discuss the pandemic - related increase in government debt, my contribution will largely focus on public debt levels in the post - pandemic environment and over the longer term. let me begin by outlining the traditional criteria to evaluate the trade - offs of additional debt. these are important, as they will frame the debate. i will then turn to the irish experience and conclude with some views on the debate around assessing appropriate levels of public debt. in aggregate, increasing government debt is considered worthwhile if the rate of return on its use is greater than its cost of servicing. classic examples include government investment in infrastructure and education that boost economic growth potential. other public policy goals may justify an increase in government debt. these include the use of automatic stabilisers and / or discretionary fiscal measures to stabilise macroeconomic fluctuations. in addition, smoothing the impact of targeted changes in policy to ensure structural vulnerabilities, such as economic inequality, are addressed without the need for large and / or immediate adjustments to taxation and expenditure. higher debt, however, can limit room for manoeuvre in future downturns. when government budgets come under pressure, public investment often experiences the largest cuts. elevated debt increases sovereigns ’ exposure to fluctuations in financial market sentiment, especially those with shorter maturity structures. depending on its composition and how it is financed, large public expenditure programmes also have the potential to crowd out private investment. 2 the unprecedented scale of the pandemic - induced shock provides little room for doubt that the significant increase in government debt was justifiable, on economic grounds alone. accommodative monetary and fiscal policy, including in the euro area, has enabled the use of all available resources to minimise the economic damage and support those most in need. sectors with lower - income workers, for example, were disproport