EU business chiefs warned that inflation-fuelled wage demands risk turning temporary price spikes into a vicious cycle of higher costs as the ECB’s Philip Lane tried to calm the fraying nerves of policy makers.

Eurozone finance ministers meeting yesterday say inflation is temporary, despite warnings from EU business leaders that labour shortages and wage demands could lead to lasting effects.

Markus J  Beyrer, the director general of EU business group BusinessEurope, said yesterday that supply pressures on firms are  “threatening to blunt the upturn”.

“There is a clear risk that even short-term price rises could translate into longer-term inflationary pressures,” he said.

“Wage moderation will be important in ensuring that temporary price rises do not lead to a damaging wage-price spiral, which would risk damaging Europe’s global competitiveness and cause permanently higher inflation.”

Services and construction firms are reporting record high input costs, according to recent surveys by Ulster Bank and AIB. Ahead of yesterday’s meeting, a senior EU official said: “The risk of seeing second-round effects in terms of wage formation is clearly something that needs to be taken seriously.”

However, European Central Bank chief economist Philip Lane told Spanish newspaper El País that while wage pressures were a “risk factor”, there was no evidence for wage inflation “right now”.

He added that there are “powerful reasons to believe inflation will fall next year” and urged people to “be patient so as not to overreact to a temporary increase”.

Mr Lane’s successor as Governor of the Central Bank here, Gabriel Makhlouf, told the Irish Independent last week the ECB needed to be “absolutely vigilant” and ready to act if it sees second-round inflation effects, including on wages.

Paschal Donohoe, who chairs monthly meetings of the 19-member Eurogroup, said yesterday that finance ministers “acknowledge the challenges” for firms and consumers.

But EU economy chief Paolo Gentiloni said inflation – which rose to 4.1pc in the eurozone in October, and 5.1pc in Ireland – is down to high energy prices.

“We believe that energy prices have a decisive impact in this rise of inflation and that the phenomenon will be a temporary one, probably reducing itself already in the first half of next year,” Mr Gentiloni said.

The bloc will publish its updated economic forecast on Thursday. Rising energy prices have led to calls from France, Spain, Greece and the Czech Republic for more action at EU level to aid consumers and struggling firms, some of whom have gone bust as wholesale gas prices rise.

French finance minister Bruno Le Maire hit out at what he called an “unbearable” situation yesterday, calling for long-term contracts to lock in renewable energy prices and compensate consumers and utility firms for price rises using energy producers’ windfall revenues. However, Dutch finance minister Wopke Hoekstra said it was up to individual governments to tackle energy costs and ease the pressures for consumers.