German unions to seek substantial hikes in 2008

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Robust growth over the past year and declining unemployment have emboldened Germany's trade unions, which are gearing up to call for substantial wage increases in 2008.

31 December 2007

Berlin (dpa) - Robust growth over the past year and declining unemployment have emboldened Germany's trade unions, which are gearing up to call for substantial wage increases in 2008.

The powerful IG Metall union is to demand 8 per cent for the steel and metalworking sectors, while unions in the chemical industry are looking at 7 per cent. The services union, Verdi, wants 8 per cent for civil servants.

The workers are receiving support from within the government. Vice-Chancellor Frank-Walter Steinmeier used a year-end interview with the mass-circulation Bild newspaper to demand a "fair share in the economic upswing" for ordinary workers.

Workers deserved substantial wage increases in 2008, said the foreign minister, a powerful figure in the Social Democrats (SPD), the junior partner in Chancellor Angela Merkel's broad coalition.

While Steinmeier was making the case for average workers, others in the party were focusing on the lower-paid.

SPD Chairman Kurt Beck has backed a statutory minimum wage for all workers - currently only workers in certain sectors are subject to minimum wage provisions - although he has acknowledged that Merkel's conservative Christian CDU/CSU bloc will not budge on the issue.

Verdi boss Frank Bsirske noted that 1.9 million people in Germany worked for less than 5 euros (7.30 dollars) an hour, whereas SPD leaders are aiming at legislation for a statutory minimum of up to 7.50 euros.

But Economics Minister Michael Glos, of the Bavarian Christian Social Union (CSU), warned that imposing a minimum could drive many into illegal jobs without unemployment insurance or health care.

"Production and services would flee abroad," he told the weekly Die Zeit.

Overhanging the debate over fair wages is a furore over executive pay, kicked off at the end of November when it became known that Porsche Chief Executive Wendelin Wiedeking was to take home 60 million euros (85 million dollars) for his work in 2007.

Merkel expressed her distaste at "payouts in the realms of fantasy" at the annual congress of her Christian Democrats (CDU) shortly afterwards, but the chancellor has made clear she will not countenance any attempt to impose a maximum on executive pay.

The SPD has set up a working committee to look into taxing bonuses, but Juergen Thumann, head of the BDI confederation of German industry, warned against "populist envy-mongering."

With an eye on opinion surveys revealing widespread anger at high manager payouts, Thumann acknowledged, however, that the criticism could "sharpen the sense of responsibility of supervisory boards and shareholders."

German President Horst Koehler, whose office generally sets him above the political fray, weighed in with a warning that the country's solid middle class was becoming unsettled.

Relatively few people had enjoyed huge increases over the past year, while most had seen disposable income stagnate or even fall, Koehler told the daily Frankfurter Allgemeine Zeitung.

Koehler, who had in November also lashed out at soaring manager pay, said executive rewards were not the central problem. "I am more concerned about the increasing uncertainty in the middle class," he said.

And another warning came from the traditionally cautious central bank.

Current rates of inflation reaching towards 3.0 per cent on the year "should not be used as a benchmark in the coming round of pay talks," Bundesbank President Axel Weber told Bild in a year-end article.

But after years of restraint amid difficult economic conditions, the unions were in no mood for further wage stagnation. "The days of ultra-low settlements are over," Commerzbank economist Joerg Kramer said.

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