FRANKFURT, Jan 18 (Reuters) – (This Jan. 17 story has been corrected to restore the dropped words in paragraph 11)

European Central Bank staff are losing confidence in the institution’s leadership following the ECB’s failure to control inflation and a pay award that lagged the leap in prices, according to a survey by trade union IPSO.

The responses underline that even central banks, whose primary responsibility is fighting inflation, are not immune to staff dissatisfaction with the sharply rising cost of living.

The survey was organised in the context of a dispute between IPSO, which holds six out of nine seats on the ECB’s staff committee, and the central bank’s board over pay and remote-working arrangements.

An ECB spokesperson did not comment directly on IPSO’s findings when asked but pointed to a separate staff survey, run by the ECB itself last year, showing that 83% of nearly 3,000 respondents were proud to work for the ECB and 72% would recommend it.

Results of IPSO’s survey, which largely focused on pay and remote-working arrangements but also included questions about trust in the board, were sent to ECB staff on Tuesday in an email, seen by Reuters.

They showed two-thirds of roughly 1,600 respondents said their trust in Lagarde and the rest of the six-member ECB board had been damaged by recent developments such as high inflation and a pay increase that did not match the rise in prices.

Asked how much trust they had in Lagarde and the board when it comes to leading and managing the ECB, the central bank for the 20 countries that use the euro, just under half of respondents said “moderate” (34.3%) or “high” (14.6%).

But over 40% of respondents said they had “low” (28.6%) or “no” (12%) trust, while 10.5% could not say.

“This is a serious concern for our institution, as no one can correctly lead an organisation without the trust of its workforce,” the union said in its email.

INFLATION SURGE, PAY BATTLES

The survey was the first by IPSO to ask about trust in top management since Christine Lagarde took over as ECB President in late 2019.

A similar IPSO survey of ECB staff, taken just before her predecessor Mario Draghi stepped down, showed 54.5% of 735 respondents rated his presidency “very good” or “outstanding”, with support for his policy measures even higher.

Then, however, inflation in the euro zone had been low for a decade. Its recent surge to multi-decade highs in countries around the world has seen a revival in battles over pay between workers and the companies and institutions that employ them.

And a majority of respondents in the October 2019 survey also complained about a lack of transparency in recruitment and perceived favouritism under Draghi.

The most recent Bank of England staff survey, also conducted in 2019, showed 64% of respondents had “trust and confidence in the Bank’s leadership”.

A 2022 U.S. government survey of employees at departments and federal agencies found that 61% of respondents had “a high level of respect” for their organisation’s senior leaders – roughly stable compared to the previous two years.

The ECB spokesperson also pointed to internal surveys in 2020-21 that found roughly 80% of respondents were satisfied with health-and-safety measures taken by the ECB in response to the coronavirus pandemic.

The latest IPSO survey showed 63% of staff who responded were worried about the ECB’s ability to protect their purchasing power after being handed a pay increase of just 4% last year – or roughly half the rise in consumer prices.

The ECB has been criticised by politicians, bankers and academics for initially underestimating a surge in the cost of living and then making up for it with large and painful increases in borrowing costs.

Lagarde, who is not an economist and had not been a central banker before joining the ECB, colourfully defended her board at an event with staff last month.

“If it wasn’t for them I’d be a sad, lonely cowgirl lost somewhere in the Pampa of monetary policy,” Lagarde said, according to a recording of the Dec. 19 town hall seen by Reuters.

She and fellow board members have long worried about the risk of a potential “wage-price spiral”, where higher salaries feed into prices, which they argue would make it harder for the ECB to bring inflation back down to its 2% target.

But IPSO said that concern is misplaced and workers should not be made to bear the brunt of the current bout in inflation.

“The ECB might be preaching lower real wages, but this is not our stance as your staff union,” it wrote in its message to ECB employees.

Editing by Catherine Evans

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