Key German union takes modest wage hike

Ulhas Joglekar ulhasj at bom4.vsnl.net.in
Fri Mar 31 05:29:59 PST 2000


Wednesday 29 March 2000

Key German union takes modest wage hike By Stefan Merx DUESSELDORF, Germany: Germany's biggest trade union accepted a three percent pay rise in a key region on Tuesday that fell dramatically short of its demands and ended a threat of strikes this week in Europe's biggest economy. The surprise pre-dawn deal between the powerful IG Metall metalworkers' union and engineering employers in Germany's biggest state, North Rhine-Westphalia, helped allay inflation fears in Europe and perked up the euro and the stock market. One analyst said she was "astonished" at its moderation. National labour and employers leaders said the accord should set a pattern for a rapid conclusion to wage rounds across the country, prompting economists to forecast that this would ease pressure on the European Central Bank to raise interest rates. Struck in the state capital Duesseldorf after all-night talks, the initial accord covered 750,000 workers in the region. Under the 24-month deal, employees will get a three percent pay rise from May 1, 2000 and 2.1 percent from May 1, 2001. That was well short of the 5.5 percent annual increase IG Metall demanded for the 3.4 million workers it represents but national leader Klaus Zwickel called it a "good result". It was above inflation of 1.9 percent and he stressed two other elements of the deal, allowing for early retirement and jobs for apprentices. "This is a respectable package," he said in a statement after the union called off planned strikes at a DaimlerChrysler car plant in southern Germany. IG Metall has traditionally been the battering ram for all German workers during the annual spring pay round but found its bargaining power somewhat undermined last week when chemical workers accepted 2.2 percent this year and two percent next. GOVERNMENT WELCOMES DEAL Chancellor Gerhard Schroeder also welcomed the new accord, saying it would help in the battle against high unemployment. "(It supports) the government's employment-oriented economic and financial policies," said Schroeder, hailing it as a show of responsibility by both sides for the overall good of the nation. His government, the first centre-left administration since 1982, had supported high wage settlements during its first year in office in 1999 as a means of boosting sluggish consumer demand. But it has been anxious that new claims do not damage German competitiveness or prompt the ECB to raise rates. "We were astonished by this deal," said Ulrike Kastens, an analyst at HSBC Trinkhaus and Burkhardt. "It's good news for the ECB and for the German economy." "The ECB will have one reason less to raise interest rates," said Stefan Bielmeier, an economist at Deutsche Bank. Werner Stumpfe, head of the Gesamtmetall employers' group, said he would recommend the agreement to his members, too. He said companies would benefit from long-term wage certainty. The DAX share index rose over one percent. "I believe the agreement should have an overall positive impact on the stock market and in particular on the `old economy' stocks, where moderate wages play a crucial role," said Gerhard Grebe, chief economist at Bank Julius Baer in Frankfurt. After news of the agreement came out, the euro briefly rose to around $0.9691 before easing back to $0.9660. The deal also adresses pre-retirement part-time working, one of the main bones of contention in talks so far. Employees can now opt for part-time working from the age of 57. Zwickel said this went a long way to achieving his union's goal of offering full early pensions at 60, rather than 65, as a means of freeing up jobs for the young. Apprentices would be guaranteed a year's employment on completion of their training. (Reuters) For reprint rights: Times Syndication Service
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