German chemical workers push for 7% wage rise

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German chemical industry workers have stepped up demands for a 7 per cent wage rise as the strong economic recovery emboldens trade unions to push for inflation-beating pay deals – despite European Central Bank warnings.

As formal Germany-wide pay talks started in Hanover, north Germany, the IG BCE trade union said the 550,000 chemical industry workers it represented should benefit from the economic upswing, which last year saw one of the fastest growth spurts since reunification in 1990.

Its demand for a 7 per cent rise over 12 months followed similarly aggressive demands by trade unions representing workers in other industrial sectors. State governments have also seen industrial action by public sector workers and Germans are braced for fresh strikes by train drivers, who have already brought rail services to a halt in recent weeks.

Chemical sector workers “gave a lot during the crisis and now they should profit from the upswing”, said Peter Hausmann, the IG BCE’s chief negotiator.

Hans-Carsten Hansen, negotiator for the BAVC chemical employers’ association, said he would seek a “moderate deal” with IG BCE, “and it won’t be 7 per cent”.

A generous chemicals industry settlement would fuel fears at the ECB of temporarily higher inflation caused by commodity and oil prices becoming entrenched via “second round effects” on wage deals. Earlier this month, Jean-Claude Trichet, ECB president, warned that the ECB’s main interest rate was likely to rise next month by a quarter percentage point from the current record low of 1 per cent. “Our message is always that second-round effects should be avoided, when we have a commodities price shock, as we have now,” he said then.

However, economists said there was little need yet for the ECB to worry. Pay deals stuck so far were “still pretty benign” especially taking into account productivity increases, said Dirk Schumacher at Goldman Sachs in Frankfurt. “It is not surprising that in Germany you have a moderate pick-up, but in the eurozone you still have negotiated wage growth trending downwards.”

Martin Lück at UBS in Frankfurt said most German pay deals struck this year would be “in industries under a lot of pressure – for instance, retail ... The risk of ‘second round effects’ is still very low”.

Separately, German construction sector workers are seeking a 5.9 per cent pay rise, while Deutsche Telekom faces demands from workers for a 6.5 per cent increase. Last week Verdi, the services sector union, struck a deal for state government workers it said was worth 2.3 per cent this year and 2.55 per cent in 2012.

Germany’s annual inflation rate was 2.2 per cent in February on a European-harmonised basis.

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