Trading Horses Over Pay

German Chancellor Gerhard Schröder held weekend talks with trade union leaders, but the two sides are still at loggerheads. The Social Democrat-led government has been urging pay moderation while unions continue to threaten strikes.

A prolonged strike hitting top industrial companies such as DaimlerChrysler could hurt the country's economic upturn and damage German Chancellor Gerhard Schröder’s chances of re-election in September.

And so far, attempts by Schröder to patch up relations with trade unions ahead of the elections have failed. The unions are sticking to their guns for an inflation-busting pay rise.

IG Metall's 6.5 percent wage demand, which unions in many other sectors of the economy have followed, is more than three times the current rate of inflation.

Behind in the polls, Schröder is banking on a turnaround in the economy to help restore his popularity but that could be put in doubt if unions resort to full strikes or win a rise far above inflation.

Horse trading behind the scenes

The Hannoversche Allgemeine newspaper cited unnamed government sources as saying union leaders had promised to refrain from criticising the government in the run-up to the elections, while Schröder said he would take into account union interests in future.

The IG Metall engineering union, however, rejected the report that Schröder had persuaded unions to avoid attacking the government ahead of the election.

The union launched a series of warning strikes this week to push home its demand.

And IG Metall spokesman Claus Eilrich pushed home the message that his union will not be gagged in a deal that would improve the Social Democrats chances for re-election.

"We will continue in future not to allow ourselves to be silenced and will aggressively represent in public the interests of policies oriented towards workers," Eilrich said.

Employers are offering a two-year deal with a two percent rise this year and next. Final settlements are traditionally struck midway between the employers offer and union demands.

Economists have warned that the union’s ambitious wage demands risk crushing the tentative recovery of the German economy.