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Tuesday, 7 May, 2002, 05:32 GMT 06:32 UK
EU calls for German wage restraint
IG Metall worker on strike
There is a wide gap between the pay demand and the offer
Engineering workers in Germany have been urged to show restraint in their pay claims over fears that sharp wage increases could hurt the economy.

The call for moderation came as Germany's first major strike since the mid-1990s entered its second day.

About 20,000 workers at 22 factories walked out of electrical engineering plants in the south-western state of Baden-Wuerttemburg.

Those walkouts followed strike action by an estimated 60,000 car manufacturing workers on Monday.

Pay claims criticised

The most prominent onslaught came from Brussels by the economic and monetary affairs commissioner Pedro Solbes.

"We have always said that the evolution of wages has to be consistent with the evolution of inflation and productivity," Mr Solbes said.

Economists have argued that engineering union IG Metall's wage demand could push prices higher, damage Germany's competitiveness and endanger the country's fragile economic recovery.

"Too high wage settlements show up quickly in higher unemployment and a temporary jump in inflation," said HypoVereinsbank's Thomas Hueck.

Copycats

But the main fear in Brussels is that the strike could spread, with copycat actions taken across the European Union (EU).

"If it became a widespread phenomenon in Europe it would be disruptive for European growth," the chairman of the European Commission's economic and financial committee, Johnny Akerholm, said.

On Tuesday morning, there were early signs that this could be happening.

The services union Verdi said it would push on with brief strikes ahead of pay talks and the construction union IG Bau confirmed that pay talks in its sector had broken down ahead of the weekend.

Miles apart

Following Monday's action - when an estimated 60,000 workers downed their tools in Germany's first major strike since the mid-1990s - there was little hope of a speedy resolution.

At further 25,000 workers at the very least would take industrial action by the end of the week in a series of targeted one-day actions that would hurt at least 50 predominantly small companies, IG Metall warned.

IG Metall boss Klaus Zwickel was widely quoted by German newspapers as saying its previously revised demand for a 4% pay rise was now off.

Any new talks with the employers' union would have to be based on IG Metall's original 6.5% demand, Mr Zwickel said.

The gap between the workers' demand and the employers' 3.3% pay rise offer will be difficult to bridge.

"We are at the upper limit of what we can afford," insisted the chief negotiator for the employers in the south-west region where the current strikes are taking place.

He received support from Mr Hueck who insisted that even 4% would be "way too much".

But Mr Zwickel remained undeterred.

"We're not striking against [the German chancellor Gerhard] Schroeder or against anybody else, but to get a fair result and we'll keep it going as long as we need," he told striking workers.

 WATCH/LISTEN
 ON THIS STORY
Wolfgang Munchau, Financial Times Deutschland
"They have switched their tactics from previous strikes - they target a different company every day"
See also:

06 May 02 | Business
Major strike hits Germany
06 May 02 | Media reports
German papers assess IG Metall case
02 May 02 | Business
Strikes return to Germany
01 May 02 | Business
German strike threat looms
17 Jan 02 | Business
Germany on brink of recession
28 Dec 01 | Business
No respite for German economy
05 Dec 01 | Business
Germany's slowdown continues
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