Cheers to the German consumer

30 March 2015 By Olaf Storbeck

German unions are proving a key ally for Mario Draghi. Civil servants and chemical workers have followed metalworkers in securing pay rises significantly above inflation. Real wages will keep rising, fuelling a consumption-driven recovery and softening deflationary forces.

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German unions and public employers agreed on a two-stage pay rise of more than 4 percent for state workers late on March 28. With the agreement, around 800,000 state workers will see their pay rise by 2.1 percent retroactively from March and by 2.3 percent from March 2016, unions and employers said after a third round of negotiations in Potsdam. The deal sets the tone for a further 2.2 million public sector officials with a different employment status and is likely to ultimately affect a total of three million employees.

On March 27, Germany’s chemical workers secured a 2.8 percent pay rise. The deal affects 550,000 workers, comes into effect with a one-month delay and has a 17-month duration.

Engineering, metal and electrical sector workers represented by the IG Metall union secured a collective pay deal in February, getting a 3.4 percent rise, far above Germany’s harmonised inflation rate which the country’s council of economic advisors expects to drop to 0.2 percent in 2015, down from 0.8 percent last year.

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