Germany’s largest industrial union, IG Metall, reached a deal for a 4.3 percent pay increase with employers just before dawn yesterday, believed to be the largest annual increase for the sector in more than a decade.
The wage deal, which is more than double Germany’s inflation rate of about 2 percent, will give about 3.6 million engineering workers a 4.3 percent pay increase for 12 months from May 1 and set a standard for other unions in Europe’s largest economy.
The agreement for the sector at the heart of the German economy came after all-night negotiations. Officials from the two sides confirmed the breakthrough at a news conference.
The talks between the giant union and officials representing Germany’s leading manufacturing sector that includes carmaking powerhouses such as Volkswagen, Daimler and BMW were closely followed across Europe, which is battling to overcome a sovereign debt crisis exacerbated by imbalances linked to Germany’s low wage growth.
The deal will bring to an end a series of partial walk-outs and warning strikes across the country by the union to press their demands for a 6.5 percent pay raise. Employers had previously offered a pay increase of just under 2.6 percent.
Union officials had threatened a full-fledged strike in the weeks ahead, which would have harmed the sector that is thriving thanks to solid economic growth in Germany and the country’s coveted export goods.
Labor unions in Germany this year are getting above-average pay increases after a decade of wage deals that even failed to keep pace with the country’s inflation rate.
The moderate deals had improved the country’s competitiveness and helped the unemployment rate fall to a two-decade low, but opened gaps with other eurozone countries that had exacerbated imbalances in the euro bloc.
German government leaders have even taken the unusual step of intervening indirectly in wage talks this year, urging employers to give workers better deals after they had accepted modest increases over the last decade.
“We have hit the upper limit of what the companies can deal with,” said Rainer Dulger, who led employers through five rounds of talks totaling 37 hours in recent weeks.