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German negotiated wages rise by largest amount in 3 years in 2014

[BERLIN] German workers under collective wage agreements benefited from their biggest pay increase in three years in 2014, helping boost private consumption and therefore economic growth as their wage hikes outpaced inflation, data showed on Tuesday.

The roughly 19 million workers covered by negotiated wage deals earned 3.1 per cent more on a monthly basis in 2014 than in the previous year, the Federal Statistics Office said.

Excluding special and one-off payments, their paychecks were 2.9 per cent bigger.

Consumer price inflation, on the other hand, slowed to 0.9 per cent last year, largely due to cheaper energy, so workers'purchasing power increased.

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Rising wages, combined with record high employment, helped boost household spending last year. Private consumption was one of the main drivers behind German economic growth of 1.5 per cent in 2014.

Germany's most powerful union, IG Metall, is calling for a 5.5 per cent wage hike for 3.7 million workers in the metals and engineering sector in current wage talks. Public sector employees at the regional level are also demanding a 5.5 per cent salary increase.

German consumer price inflation hit 0.1 per cent in December, harmonised for comparison with other European countries - its lowest level in more than five years - but IG Metall has argued that this supports its demand as giving workers more money could avert a deflationary spiral.