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(Bloomberg) — German public sector workers struck a wage deal with employers, capping a series of confrontational negotiations that have seen repeated strikes in Europe’s largest economy.
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Employees will receive one-time staggered payments totaling €3,000 ($3,300) until February 2024. After that, salaries will rise by €200 on a permanent basis, and then increase by 5.5%.
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The agreement covers about 2.5 million German public sector employees and comes after three rounds of talks failed to produce a result. Then an arbitration committee proposed a compromise, which is the basis for the deal that was concluded this weekend in Potsdam.
German Interior Minister Nancy Weser said: “We wrestled fiercely with each other in four rounds of negotiations and in the arbitration process.” “This wage settlement brings tangible relief to employees.”
Eurozone wages have become a major focus for central bankers who fear that strong increases will make it difficult to bring inflation back to their 2% target. Christine Lagarde, President of the European Central Bank, called on companies and their employees to share the burden of higher energy costs to avoid “the feedback mechanism between higher profit margins, wages and prices.”
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After the jury published its compromise proposal, economists said it would be a strong result for employees. But JPMorgan analyst Greg Vouzisi also noted that its structure “allows for significant moderation through 2024”.
Verdi’s agreement comes after IG Metall’s union guaranteed one for industrial workers last year that will see their salaries increase by 5.2% in 2023 and 3.3% in 2024. Meanwhile, workers at Deutsche Post AG struck a deal that will see their salaries increase by 11.5% on average. Over a period of two years.
Strong wage demands — and greater willingness to strike — are being fueled by the fastest inflation in decades, whose underlying forces have proven resilient despite the recent decline in energy costs. Payrolls in Germany fell by more than 3% last year if adjusted for consumer price gains, according to the statistics office.
Meanwhile, workers are in a strong bargaining position as employers face increasing difficulties in attracting employees. The labor market has been resilient in the face of the fallout from the war in Ukraine, with the main impact being the influx of refugees from the country who are slowly integrating into the labor force.