6 January 2003, 08:30  German Employers Reject Mediators' Higher Pay Plan

/www.bloomberg.com/ By Sonja Dieckhoefer
Bremen, Germany, Jan. 6 (Bloomberg) -- German employers have rejected a proposal by mediators to increase wages for 3 million public workers to avert their first all-out strike in more than 10 years.
Employer representatives voted against the proposal to increase an earlier government pay offer. Union representatives agreed to the latest offer, which would have won workers from bus drivers to nurses a 2.4 percent increase from this month and another 0.6 percent at the start of next year.
For the employers, ``the proposal is a burden, for the union it's largely acceptable,'' mediator Hinrich Lehmann-Grube told reporters shortly after 2 a.m. Frankfurt time. ``The goal was to avoid a strike, which would be more costly for public budgets and the economy as a whole than the pay increase.''
The rejection of the plan by employers keeps alive a six-week wage conflict at a time when consumer confidence in Europe's largest economy is at an eight-year low.
Walkouts last month grounded planes at Germany's biggest airport in Frankfurt and left Munich residents without buses and trams. Both sides will resume talks on Wednesday and have said they want to avoid a strike.
``Our goal on Wednesday will be to find a compromise,'' Heinrich Aller, finance minister of the state of Lower Saxony, told reporters after the briefing by mediators Lehmann-Grube, a former mayor of Leipzig, and Hans Koschnick, a former mayor of Bremen. ``We hope this time the union will make concessions to us.''
Four-Day Talks
Averting a strike would be good news for Chancellor Gerhard Schroeder. Germany's leader is struggling to kick-start the economy as unemployment rises and companies pare investment.
The wage plan, which would run until the end of April 2004, also provides for a one-time payment of as much as 216 euros ($255) in respect of the last two months of 2002.
The proposal, made after four straight days of mediation talks, increased an earlier offer of a 0.9 percent increase from January and another 1.2 percent from October made by employers, led by Interior Minister Otto Schily.
It's also more than Germany's 1.1 percent inflation rate, though it falls short of a demand by Europe's biggest union, Ver.di, for a wage increase of ``clearly'' more than 3 percent.
Germany, which already faced walkouts last year in the metal, construction, banking and retail industries, can't afford more strikes, analysts say.
Consumer Confidence
``The wage conflict in the public sector makes people even more worried about the state of the economy,'' said Rolf Buerkle, an economist at GfK AG, Germany's biggest market research company. ``It's already weighing on consumer confidence. A strike would aggravate that.''
GfK on Friday said its index of consumer sentiment dropped to the lowest level since December 1994. Consumer spending accounts for almost 60 percent of the German economy. The company added it doesn't see a recovery until April at the earliest.
Rising wages for government workers will make it more difficult for Finance Minister Hans Eichel to trim the country's budget deficit, already above a European Union limit of 3 percent of gross domestic product.
Employers have said higher wages may force them to fire workers to keep costs in check.
Ver.di, led by its president Frank Bsirske, has almost 3 million members from 1,000 professions, including clerks, gardeners, journalists, retail staff, cleaners, professors and hairdressers.

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