Members of the IG Metall union held several demonstrations to push for an eight percent wage increase – Copyright PIB/AFP –
Germany’s biggest union on Friday agreed sharp wage increases that are expected to cover nearly four million workers facing runaway inflation, avoiding a major strike in Europe’s biggest economy.
The deal will be closely watched across the continent as industrial action spreads due to rising costs, particularly energy, sparked by Russia’s invasion of Ukraine.
The deal for raises totaling 8.5 percent between the IG Metall union, which represents workers in the key metal and electrical sectors, and employers was reached early Friday after weeks of talks and strikes. .
The so-called “pilot agreement” in the southern state of Baden-Wuerttemberg, which is expected to eventually cover some 3.9 million workers across Germany, sets out how the wage increase will be introduced in two stages, in 2023 and 2024.
It also includes a payment of 3,000 euros ($3,100) to combat the impact of inflation.
“Employees will soon have significantly more money in their pockets, and permanently,” said Joerg Hofmann, president of IG Metall, seen as a trendsetter in wage negotiations across the country.
The union had initially asked for an eight percent increase over 12 months, the biggest increase since 2008.
Its members come from a wide range of key businesses, from automotive to electronics.
Workers have turned up the pressure, with demonstrations and a series of “warning strikes” in late October, which are limited-duration strikes that often accompany wage negotiations in Germany.
If no agreement was reached, the union was about to launch broader 24-hour strikes.
– Offer ‘Face’ –
The Gesamtmetall employers’ group said that while the deal could hurt the companies’ competitiveness, a serious labor dispute would have caused even greater damage.
Group chairman Stefan Wolf said it was an “expensive” deal but added: “We can now focus on work and do our part to overcome an expected downturn as quickly as possible.”
Under the agreement, workers’ wages will increase 5.2 percent starting in June 2023, followed by a 3.3 percent increase in May 2024.
While businesses are under pressure to raise wages due to rising costs, there are fears that raising them too much could fuel already sky-high inflation.
German manufacturers are also facing additional pressure due to high energy costs, caused by the drastic reduction in gas supplies from Russia, as well as the increase in the cost of raw materials.
German inflation hit 10.4 percent in October, while the government forecasts the economy will contract 0.4 percent in 2023.
Berlin has been rolling out aid measures to combat rising prices, including a 200 billion euro fund to reduce energy costs.
Workers have been staging strikes across Europe, from France to Greece, over the cost of living crisis.
Inflation in the euro zone is reaching a record high and the EU warned last week that the single currency area will go into recession this winter.