German public sector offered low wage rise

The German government opened the 1993 wage round yesterday with a demonstratively low offer of 2.25 per cent for the pace- setting public sector.

Having requested more than 5 per cent, Monika Wulf-Mathies, leader of the main union, OTV, immediately rejected the offer as 'lacking any social feeling, and therefore unacceptable'. Last year the OTV, after a bitter 10-day strike, smashed the government's hopes of holding wage increases below 5 per cent.

The government cited the country's severe economic difficulties as the reason behind its low offer. With unemployment rising sharply in an economy in recession, there appears to be little left of last year's union militancy.

It is widely expected that a settlement will be reached at around 3 per cent, which would be less than the average inflation rate predicted for this year of between 3.5 and 4 per cent.

After the initial round, the two sides agreed to resume talks on 22 January. There is considerable pressure on the government side to conclude the public sector pay negotiations as swiftly as possible.

A successfully restrained deal with the OTV is regarded as the key signal that the Bundesbank is awaiting before it eases interest rates.

The setting of the date for a resumption of wage talks for just after the next regular meeting of the Bundesbank central council on 21 January would appear, however, to reduce the chances of an imminent reduction in key interest rates.

The government's main negotiator, the Interior Minister, Rudolf Seiters, described the 2.25 per cent offer as 'entirely reasonable, adapted to the difficult and unstable economic situation, and the extremely strained public finances'.

He also linked the offer to the aims of the solidarity pact - the planned agreement for uniting the opposition, unions and employers in a drive to rebuild eastern Germany.

The public sector unions, representing 2.3 million workers, are expected to focus on trying to protect the lower-paid among their members.

Ms Wulf-Mathies said that the so-called 'social component' in any settlement had an absolute priority over other considerations.

'We will not accept an offer which does not give a better deal to the lower-paid,' she said.

Ms Wulf-Mathies also rejected the calls to accept a low pay increase as a contribution towards the solidarity pact.

'Pay talks and the solidarity pact are two different things,' she said. 'Our goal is to secure real income levels.'

The Finance Minister, Theo Waigel, confirmed yesterday that he was considering a 3 per cent cut in social benefits and unemployment assistance.

'We must save at all corners to create room to finance the debt inherited from eastern Germany, the redistribution of revenues between the government and the federal states, and to finance investment in the east this year, 1994 and 1995,' he said.