Top German union demands pay hike for car, engineering industries

Feb 7, 2012, 14:34 GMT

Frankfurt - Germany's biggest trade union demanded Tuesday a pay hike of 6.5 per cent for the engineering and car industries.

Berthold Huber, leader of the union, IG Metall, said in Frankfurt, 'Our demand is economically justifiable and would ensure a fair share to workers from economic development.'

Chancellor Angela Merkel's government has hailed steady labour costs as key to the country's economic resilience. Retail inflation in 2011 was 2.3 per cent, but economists say the income gains of many Germans have lagged behind that level.

Merkel has recommended that countries hit hardest by the sovereign debt crisis must focus on restoring their economic competitiveness. Pressure grew on Greece in January to slash private-sector wages.

The demand is the first move by the union, which has 2.2 million members, to renew its collective labour contracts with the metal employers' federation, Gesamtmetall, for 3.6 million people working in the car, electronics and machinery industries.

Employers must pay equal rates to staff whether or not they are IG Metall members. Gesamtmetall rejected the demand, saying German inflation and other economic data justified a pay hike of no more than 3 per cent.

The two sides are expected to negotiate until May 2, after which IG Metall can legally call a strike to press its demand.

After years of wage moderation, many believe it is time for bigger pay rises in industries that can afford them, with massive car and machinery exports spurring those demands.

Germany's economy is flat after two years of strong growth, but most analysts expect a major contraction to be avoided.

Commerzbank analysts predicted that with Germany's economy likely to grow above the eurozone average and its unemployment lower than in other nations, pay would tend higher.