German employers and metalworkers agreed on a pay rise to end a 10-day strike in the southern state of Baden-Wuerttemberg that's cut production at companies including DaimlerChrysler AG.
As many as 870,000 workers will get a 4 percent pay rise from June and a 3.1 percent increase a year later, as well as a one-time payment of 120 euros (US$109), IG Metall, Germany's second-largest union, and the Gesamtmetall employers group said.
The strikes, the first in seven years, have made it more difficult for Europe's largest economy to recover from last year's recession. Unemployment rose in April for a 14th month in 16, while business confidence fell for the first month in six.
"Given the state of the economy, the wage deal is too high," said Ulrich Ruetz, chief executive officer of Beru AG, a maker of ignition systems for customers including General Motors Corp and DaimlerChrysler.
"It's a substantial increase in costs, which may prompt us consider moving production and jobs to other countries like Ireland, Hungary, France or Spain," he said.
The accord reached may set a precedent for other regions.
Still, IG Metall chairman Klaus Zwickel said at a press conference that it doesn't mean an end to the nationwide pay dispute.
"There's no all-clear for Berlin and Brandenburg," said Hasso Duevel, IG Metall's chief wage negotiator in the region.
Some 2,800 workers at nine companies will strike on "as planned" on Thursday, he said.
The European Central Bank has said it's worried higher wages and rising oil prices may boost inflation, spurring it to raise borrowing costs for the first time in 18 months.
Inflation has been at or above the ECB's 2 percent limit for 23 months. ECB President Wim Duisenberg said two weeks ago that inflation isn't slowing as much as expected. Consumer prices climbed in April in France, Spain, the Netherlands and Finland.
"It's a bearable agreement for the ECB. It will contain some of the upside risks the ECB has been mentioning in the past weeks," said Jose Luis Alzola, an economist at Schroder Salomon Smith Barney. "They will now be a little more relaxed."
The breakthrough is a boost for German Chancellor Gerhard Schroeder, whose party is trailing the opposition by as many as 10 percentage points in opinion polls before September's election.
"The voices of reason in both camps have prevailed," he said.
Some 23,000 workers at 25 companies went on strike today in Germany's south-western region, the home of 4,600 of Germany's 22,000 metals and engineering companies. Strikes cost an average 945 euros (US$862) in sales per day per worker, according to the IW economic institute.
"We welcome very much that the hard fought-over compromise means no further effects on car deliveries," said Guenther Fleig, DaimlerChrysler's head of personnel, in a faxed statement. "The positive outlook for 2002 thus remains intact."
IG Metall had raised pressure outside Baden-Wuerttemberg.
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