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German jobs pact hit by union pay demands

BERLIN: German engineering union IG Metall undermined hopes of labour harmony in Europe's largest economy on Monday as leader Klaus Zwickel said the union would announce a 2000 pay demand well above employer expectations.

"The board of IG Metall on Tuesday will recommend to its regional wage commissions that the union demands a wage increase clearly above four percent," Zwickel said in an interview to be published in Tuesday's Bild newspaper.

Hans-Olaf Henkel, president of the Federation of German Industry, dismissed such a wage demand as "irresponsible".

A deal reached on Sunday in the "Alliance for Jobs" talks between government, employers and unions was widely viewed as a sign unions were ready to opt for lower pay rises in return for concessions on early retirement.

Chancellor Gerhard Schroeder, who chaired the talks, hailed Sunday's deal as a breakthrough in German labour relations.

Schroeder urged the participants in the Alliance for Jobs to stick to the agreement and said he was not worried by higher than expected wage demands as the unions always asked for more than was finally agreed.

"They will meet somewhere in the middle," Schroeder said at a state election meeting in Schleswig-Holstein late on Monday.

The deal calls on the 2000 wage round to make job creation a focus of future collective wage bargaining rounds and includes financing for early retirement schemes across industry, in theory freeing up jobs for younger workers.

Employers insisted this could only happen if future wage agreements were limited to productivity growth. Union demands usually take into account productivity gains and inflation.

In return, ways are to be found allowing older workers to retire early without an extra burden on the welfare state, with the aim of opening up hundreds of thousands of jobs for new entrants on to the labour market.

Zwickel's union colleague Dieter Schulte, head of the German Trade Union Federation (DGB), also dismissed widespread interpretations by employers that the deal would limit future pay increases to the rise in productivity.

"I can warn right now against the belief that union demands for 2000 will be oriented purely towards productivity growth," Schulte told InfoRadio Berlin.

"That may be the outcome, after discussion and negotiation, but that will not be synonymous with the actual demand of the trade unions," he added.

For their part, employers insist this year's wage rounds should stand for at least three years to provide extra stability and have rejected the idea of industry-wide early retirement.

"Nothing less than three years. We want long-term rules," Werner Stumpfe, president of the engineering employers group Gestamtmetall, told ZDF television.

Schroeder hopes the Alliance for Jobs will help him fulfil an election pledge to substantially cut unemployment, currently stuck at just above 10 percent, by the 2002 general election._Reuters