German public sector workers should consider resuming strikes after mediators proposed a pay hike that fell short of demands, a union leader said on Thursday. Strikes earlier this month disrupted hospitals and kindergartens, and crippled transport in Germany, Europe's largest economy.
The mediators, called in after earlier wage talks broke down, recommended public sector workers should receive a 4 percent pay rise from April 2008 and a further 2 percent hike from January 2009. Trade union Verdi rejected the proposal, which would affect around 2 million public sector workers.
The union wants an 8 percent rise for federal government and local authority staff affected by the talks, and had already rejected an offer of 5 percent spread over two years. "I will recommend to the wage commission that a ballot be held and strike action begun," Verdi's chief Frank Bsirske told a news conference in Friedrichshafen, in southern Germany.
In the last two years, Germany has enjoyed its strongest burst of economic activity since reunification in 1990 and workers want a greater share of the success after years of wage moderation that helped boost firms' profitability.
The European Central Bank is paying close attention to the public sector wage negotiations, as well as pay talks in other sectors, concerned that generous deals could fan inflation. Euro zone inflation hit a record high of 3.3 percent in February.
Employers had accepted the mediators' plan, the Interior Ministry said. Verdi and employers representatives were due to meet for a new round of talks on Saturday. The mediators' proposal for public sector workers included a one-off payment of 450 euros ($710.2) both this year and next. The plan amounted to an 8 percent rise over 2008 and 2009, the Interior Ministry said. The proposal included extending state employees' working week by 30 minutes to 39.5 hours from July.
"The rejection of the mediation proposal by the unions is regrettable and incomprehensible," Interior Minister Wolfgang Schaeuble said. Dubbed a "mega wage year" by one of Germany's leading unions, 2008 has already delivered a 5.2 percent pay rise for steel workers, their biggest in 16 years.
Juergen Michels, an economist at Citigroup in London, said the new proposal for public sector workers could lay the foundations for a final settlement. "It would be unusual for the union to have accepted it straight away. But there's a good chance there will be a deal during the talks at the weekend," he said.
"I think the overall package will be acceptable for the ECB if it doesn't vary greatly from what it is now." Lothar Spaeth, who leads the mediation panel for employers, said he was confident a deal could be reached at the weekend, provided the proposal was examined "objectively". The Finance Ministry welcomed the mediators' proposal as "a reasonable compromise."