FRANKFURT (AFP) - Trade union IG Metall has obtained the biggest German steel workers raise in 15 years, a encouraging sign for other sectors but also a likely red flag for the European Central Bank.
Employers and the union agreed late Tuesday to a 5.2 percent pay raise for steel workers, IG Metall said overnight, the first key wage agreement in a series of talks that might fuel inflation in the biggest European economy.
The increase is to take effect on March 1 and remain valid until March 31 2009, the trade union said.
In February, 85,000 steel workers in three northwestern German regions would also receive a bonus of 200 euros (300 dollars) under terms of the agreement.
It was the biggest sector increase in 15 years.
Labour Minister Olaf Scholz termed the accord "adapted," and told German radio: "After moderate salary increases these past years and following two years of strong growth, it is necessary now to see more substantial salary increases."
IG Metall president Berthold Huber welcomed what he called a "good accord" that brought "more justice" to steel workers who had contributed to strong sector results in the past few years.
Bosses said they had sought to avoid damaging strikes and that "the accord reflects the exceptional situation in a steel sector that is currently booming," according to a statement that quoted Dieter Hundt, head of the German employer's federation BDA.
Normally, agreements in the cyclical sector do not serve as models for other sectors, but "this time however, the link between steel and other parts of the economy could be closer," noted Bank of America economist Holger Schmieding.
Lower unemployment has emboldened unions to press for higher wages, with chemical workers seeking a seven percent increase and service sector workers looking for eight percent for around 1.3 million civil servants.
Higher wages could create longer-term inflation however, according to the European Central Bank, which has warned several times against such "second round" effects following steep increases in the cost of energy and food.
They could also make German companies less competitive compared with foreign rivals.