German Chemicals Sector Agrees to Moderate Wage Deal

Employers and trade unions said they agreed on Wednesday to a one-off payment for workers in Germany's chemicals sector but no hike to base wages in a deal that lasts 11 months.

Under the agreement, which affects some 550,000 workers in a major German export sector, the one-off payment would amount to €550 for workers on regular shifts. Firms not affected by the economic crisis would pay a further €200 bonus.

Employers had said in the run-up to the final negotiations that they saw no room for a wage increase given the fragile state of the economic recovery, which stalled in Germany over the winter. Unions had insisted on a pay rise. Both sides welcomed the deal, which wage experts said was appropriate for the economic environment.

"It is moderate and fair from the perspective of businesses' cost burdens in the crisis," said Hagen Lesch, wage expert at the IW economic institute.

Workers should receive their one-off payments by end-June. The start and end of the 11-month period varies across regions, however, as existing agreements expire at varying times.

German chemicals industry group VCI said last month that an increase in capacity utilization in the sector, a key measure of recovery, had tapered off amid a sluggish upturn in Europe. It expects sector revenue to gain 6% in 2010 and for output volumes to rise 5% this year. Germany's chemical makers, the country's fourth-largest industrial sector, are currently using about 78% of their equipment and plants, below historic averages of 82-85%.

Germany's BASF, the world's largest chemical maker, has predicted significant profit gains this year, but said the economic recovery remained shaky.

"This wage agreement lays a bridge from the crisis to the recovery," said Michael Vassiliadis, chief of the IG-BCE union.

Dieter Hundt, president of the German employers association, added of the deal: "It reflects the still difficult situation in many parts of this sector and secures jobs."

In past years, negotiated wage increases at chemical companies have been higher than the national average. In 2009 workers in the sector secured a 3.3% increase, compared to an average 2.6% rise nation-wide.

By comparison, unions in the harder-hit engineering sector agreed a two-year deal this year that sees a one-off payment of €320 per worker and a 2.7% raise from April 2011.

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