Swedish unions seek 2.8 per cent wage hike with tacit central bank support

Wage level 'won't jeopardize competitiveness': Unions

STOCKHOLM (Reuters) — Sweden's main industrial unions sought on Monday pay rises of at least 2.8 per cent for next year, winning tacit support from a central bank seeking to push up inflation while setting the stage for tough negotiations with employers.

The talks, beginning later this autumn, will set the level of wage increases across much of Swedish industry.

"This is a wage level that won't jeopardize competitiveness and is in line with the central bank's inflation target," the unions said in a statement on Monday.

Teknikforetagen, an association of industrial employers, said the demands did not reflect the tough conditions for Swedish exporters, struggling with high labour costs compared with European competitors.

"We have to dampen costs and improve competitiveness," Anders Weihe, head of wage negotiations at the association said.

The wage round has been complicated by inflation that has been have been flat or negative for much of the last three years.

Unions say rises should take the central bank's two per cent inflation target as their baseline, an argument that, if accepted, would tend to help boost prices towards that figure.

Central bank Deputy Governor Per Jansson declined on Monday to comment directly on the unions' demands. But he said wage rises of three to 3.5 per cent should be considered "normal" in an economy expanding at the rate of Sweden's.

The Riksbank, which has slashed base rates to a record low of -0.35 percent, forecasts inflation will hit its target some time in 2016.

Employers argue that wage settlements should be based on current inflation. In September, headline consumer prices rose 0.1 per cent year on year.

A new wage deal is expected before March. Last year's wage round resulted in rises of 2.3 per cent.

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