New pay deal sets bar for rest of German workers

Stuttgart

A HARD-FOUGHT deal on pay and working hours for industrial employees in south-west Germany has set a benchmark for millions of workers in Europe's largest economy and heralds wage growth in the coming years.

The agreement between labour union IG Metall and the Suedwestmetall employers' federation, struck overnight, will bring a 4.3 per cent pay raise from April and other payments spread over 27 months.

Tough pay negotiations are expected to end years of wage restraint in Germany, potentially aiding the European Central Bank (ECB) as it tries to get euro zone inflation back up to the bank's target rate of just below 2 per cent.

On an annual basis, the agreement is equivalent to a 3.5 per cent increase in wages, said Commerzbank analyst Eckart Tuchtfeld; this is well below IG Metall's initial demand for a 6 per …