German employers urge moderation in new pay round

THE BIG guns fired their first salvos in Germany's 1995 wage round yesterday, with engineering employers urging more of this year's moderation in a continued effort to cut costs.

Presenting a five-point strategy paper, which studiously avoided setting a pay target, the employers' federation, Gesamtmetall, called for an extension of the historic agreement on flexible working times, negotiation on ways to reduce further unit labour costs and postponement of an agreed reduction of the working week to 35 hours in October 1995.

The engineering workers' union, IG Metall, is formally to announce today its opening pay bid, but reports have made clear it is looking for an increase of nearly 6 per cent on the strength of the fast improving economy.

Germany's dominant union flatly rejected renegotiating the 35-hour week. There was room for compromise on wage increases, it suggested, but only in return for binding job security guarantees.

The engineering sector negotiations, which open the 1995 pay round, set the benchmark for the rest of the economy. The Bundesbank has already hinted that any deal that strays too far above 2.5 per cent would accelerate the onset of a tighter monetary policy.

Last year saw some of the lowest pay deals in Germany for many years as the unions, hammered by recession and soaring unemployment, made historic concessions on flexible working arrangements and innovative pay differentiation within Germany's traditionally rigid bargaining arrangements.

But after two years of declining real wages the unions are insisting on their share of a recovery that has come faster and stronger than most expected.

In sharp contrast to its unusually aggressive approach in the last round, Gesamtmetall is this time adopting a more conciliatory tone. Realising there is little chance of renegotiating the 35-hour week, it is focusing on cost-cutting measures to accompany the reduction.