German pay back

4 April 2012 By Ian Campbell

As most of Europe cuts wages, Germany is letting them rise. The economic powerhouse can afford the generosity and its growth will benefit. Periphery exports may get a bit of a boost but if German inflation leads to tighter monetary policy, the zone’s divisions will get worse.

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Two million German public-sector workers in the Verdi trade union will receive a pay rise of 6.3 percent over a 24-month period, according to a government official leading the talks. The IG Metall union, which represents industrial workers, is looking for a 6.5 percent rise in talks that will begin in mid-April.
At a conference in London on March 28 Jens Weidmann, the head of the German Bundesbank, said “you will see inflation pressures rise in Germany.” He also said that in the euro zone he expected “more heterogeneity, more diverse developments in the euro area in the years ahead, with Germany being at one end of the spectrum and other countries being at the other.”

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