German industrial workers to get pay raises in 2-year deal

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BERLIN (AP) — Germany’s biggest industrial union agreed with employers Friday on a pay deal that will see millions of workers get raises totaling 8.5% over two years as well as one-time payments meant to cushion the effect of sky-high inflation.

The IG Metall union and employers reached a compromise in the southwestern state of Baden-Wuerttemberg, a key industrial region. In Germany, wage deals are typically hammered out in negotiations between employers’ organizations and unions that cover a whole sector, and an agreement reached in one region is generally applied nationwide.

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IG Metall negotiates for workers in the auto and machinery industries among others, representing a total of more than 3.8 million workers.

The union initially demanded an 8% pay increase and a one-year deal. It first made the demand in early July; since then, Germany’s annual inflation rate has risen from 7.6% to 10.4%.

In their fifth round of talks, both sides agreed to raises of 5.2% next June and another 3.3% in May 2024. On top of that, workers will get one-time payments of 1,500 euros ($1,550) at the beginning of 2023 and another 1,500 euros a year later.

German Chancellor OIaf Scholz, who has sought to find ways with unions and employers to address the impact of rising prices while preventing an inflationary spiral, has been keen to promote such tax-free payments of up to 3,000 euros.

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“We have succeeded in an extremely challenging time in appreciably unburdening employees, sustainably stabilizing incomes and strengthening purchasing power,” IG Metall Chairman Joerg Hofmann said in a statement. He argued the agreement would strengthen the German economy, which is expected to shrink next year.

The chief negotiator for employers’ association Suedwestmetall, Harald Marquardt, said the outcome was acceptable but “certainly painful in many points and absolutely at the limit of what the majority of our members think is sustainable.” He said employers agreed partly because of the need to head off strikes in an already uncertain situation.