German union demands 5.5 per cent wage increase

IG Metall threatens widespread strikes

FRANKFURT (Reuters) — Germany's most powerful union, IG Metall, said employers should respond swiftly to its 5.5 per cent wage rise demand or face widespread warning strikes from the end of the month.

The union, which is negotiating on behalf of 3.7 million workers in the metals and engineering sector, said close-to-zero inflation in Germany did not undermine, but rather supported, its demand, which could help avoid a deflationary spiral.

IG Metall has an agreement not to strike before second-round negotiations end on Jan. 28. Three isolated warning strikes have already taken place in the state of Thuringia.

"I expect employers to put forward an offer in the second round if they are interested in a quick agreement and no further expansion of the conflict," IG Metall deputy chief Joerg Hofmann told a news conference.

"You can count on the fact we'll have support for our demands through corresponding solidarity measures of our workers from Jan. 29 nationwide."

IG Metall held a first round of wage talks with employers last week in Bavaria but they ended, as expected, with no agreement.

Final wage agreements are usually far below the original demands. In 2013, IG Metall agreed to a 20 month deal increasing wages by 3.4 per cent and 2.2 per cent in two steps.

The Bundesbank, Germany's central bank, said last year that above-inflation pay rises could help the economy by stimulating consumer spending, a statement to which IG Metall alluded once again.

But in its monthly report on Monday, the Bundesbank said the Germany economy appeared to have overcome a weak period more quickly than expected. It said it would cut its inflation forecasts for 2015 due to the low price of oil.

Germany consumer price inflation slowed to 0.1 per cent in December, its lowest level in over five years, but a survey by UniCredit released on Monday showed that Germans thought that prices had dropped 1.2 per cent.

Economists said this perception, caused by low fuel and food prices, could help boost private consumption.

IG Metall said it based its wage demands not on actual inflation rates but on the European Central Bank's target of close to but below 2 per cent.

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