German Chemical Workers Win Above-Inflation Pay Deal

24.05.2012 -

Germany's chemical industry union agreed on Thursday to a wage hike well above inflation in a deal that could further boost consumer demand in Europe's biggest economy and provide some relief to its recession-mired euro zone partners.

The 4.5% wage rise over 19 months for the chemical sector's 550,000 workers is the second generous settlement agreed in Germany in less than a week after IG Metall won a 4.3% raise for its 3.6 million engineering workers.

Both deals underscore Germany's readiness to shift away from its traditional wage restraint - a stance many economists say is crucial to help narrow the gulf in economic performance that has exacerbated the euro zone debt crisis.

The agreement struck by the IG BCE union and employers falls below its demand for a 6% hike over twelve months but is well above Germany's inflation rate of about 2%.

"This wage deal sends a positive signal," IG BCE chief Michael Vassiliadis after the talks.

The two sides also agreed on greater benefits for older workers, such as more time off and a four-day week for employees approaching retirement age.

In the last wage round in 2011, the union and employers had agreed a 4.1% increase for the chemical sector over 15 months.

The pay increase won by Germany's largest industrial union IG Metall last weekend was the biggest in 20 years.

While wages are falling in troubled euro zone debtor countries, German workers are enjoying the benefits of a robust economy and a healthy labour market after a decade of wage restraint.

The German economy grew by 0.5% in the first quarter on a bounceback in exports, data published on Thursday showed. Much of the euro zone, by contrast, especially in heavily indebted southern Europe, remains mired in recession.

More money in the pockets of German consumers could boost demand for imports from European partners.