Employers and union officials said on Friday they agreed a pay deal in a key state in Germany's metals and engineering sector centring on a 4.1 percent wage increase from June, averting damaging strikes.
Analysts said the agreement was positive for both employers and workers and was unlikely to worry European Central Bank (ECB) policymakers concerned about risks to price stability.
"The wage rise has come in lower than generally expected," said Eckart Tuchtfeld, an economist at Commerzbank in Frankfurt. "ECB fears of excessive wage pressure in Germany and the resulting risk to inflation should ease as a result."
The 19-month accord brokered between union IG Metall and employers' group Suedwestmetall in the south-western state of Baden-Wuerttemberg should pave the way for a nation-wide agreement for the 3.4 million workers in the sector.
The deal, the most generous in the sector since the early 1990s according to the Hans Boeckler Stiftung, a union-funded think-tank, comprises a 4.1 percent wage increase from June 1, 2007 plus a one-off payment of 400 euros ($544) to cover the months of April and May 2007.
From June 1, 2008 wages would also be increased by a further 1.7 percent for five months and from June through October 2008 there would be five one-off payments equivalent to 0.7 percent.
The second phase of the increase and the five payments can be delayed by up to four months, subject to the approval of firms and works councils.
IG Metall has staged brief walkouts in four of the six wage rounds since 1997 and last launched a full-scale strike in 2002 which was joined by more than 200,000 workers. Workers had demanded a 6.5 percent pay increase and employers had previously offered only a 2.5 percent fixed wage raise, plus a one-off sum equivalent to a 0.5 percent rise.
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