The German government and unions have agreed on a two-stage wage increase of 4.75 percent over this year and next for more than 2 million public sector employees at the federal and municipal level, the Interior Ministry said on Friday. Strong domestic demand has replaced exports as the main pillar of support in Europe's largest economy, and with consumer prices barely rising the pay hike means employees will have more money to spend, in a potential boost to consumption.
The unions had initially demanded a pay hike of 6 percent for the next 12 months while public sector employers had offered a wage increase of 3 percent over two years. "The negotiations were difficult, but constructive after all," Interior Minister Thomas de Maiziere said. He called the agreement a "more than fair and mutually acceptable result". The deal includes a pay hike of 2.4 percent for this year, starting retroactively on March 1, and another increase of 2.35 percent starting next February.
This will lead to additional costs for the federal government of some 700 million euros, De Maiziere said. For the municipalities, the deal will lead to extra costs of 6 billion euros, negotiator Thomas Boehle said at a news conference. In another positive sign for private consumption, Berlin decided in mid-April to raise pension entitlements by more than 4 percent in the West and nearly 6 percent in the East this year - the biggest hikes in more than two decades.
The pay hike in the public sector is the first major agreement in this year's round of wage negotiations in Germany. Earlier on Friday, more than 100,000 workers in the metals and electrical industries staged walkouts across the country after labour union IG Metall rejected a wage offer for the 3.8 million employees it represents. IG Metall union turned down an offer from employers for a wage rise of 2.1 percent, saying it fell too far short of its demand for a 5 percent increase.
"The 2.1 percent over 24 months still keeps workers on a restricted diet in favour of profits. Economic growth is ignored," said Knut Giesler, a regional leader at IG Metall in North Rhine-Westphalia, the most populous state. IG Metall said on Thursday that strikes would continue into the coming week, adding that it would start 24-hour strikes if no agreement was reached by the Pentecost holiday in mid-May.
In the southwestern state of Baden-Wuerttemberg, the home of car brands Porsche and Mercedes, more than 37,000 workers from more than 150 companies joined walkouts on Friday, the union said. Around 17,000 workers at companies including industrial group Thyssenkrupp and carmaker Daimler took part in industrial action in North Rhine-Westphalia. Overall, nearly 110,000 workers joined the walkouts and participated in industrial action, IG Metall said.
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