Germans Worry Strike Settlement Sends Wrong Message to Metalworkers' Union

THE initial relief which marked the end of Germany's bitter 11-day public sector strike has given way to a widespread sense of dissatisfaction and concern.

Even as the ink dries on Thursday night's controversial settlement, the country is bracing for what could be a far more economically damaging strike by western Germany's 4 million metal and engineering workers.

Rank-and-file members of the public workers' union criticized their leaders for agreeing to the 5.4 percent increase, casting doubts over the outcome of the union ballots needed to officially call off the strike, which has effectively ended. Voting was due to start today.

Finance Minister Theo Waigel, who is seeking to battle an economic downturn with tough cost-cutting measures, expressed outrage at what he called "a disastrous settlement that could endanger jobs."

Throughout the negotiations, the government has fought to avoid exceeding the 5 percent mark, arguing a higher level would rapidly fuel inflation.

"To have simply accepted the original mediator's proposal of 5.4 percent would have provoked far worse accusations of weakness than anything we now hear," says Hans-Jurgen Meltzer of the Deutsche Bank. "The only positive result ... is that the Kohl administration showed it would not grant wage recommendations without a fight."

Economists were more concerned over the symbolic effect of the settlement than its immediate economic repercussions.

The IFO economic research institute says the estimated 16.1 billion deutsche marks ($9.7 billion) the pay hikes will cost the government, will not affect forecasts for economic growth in west Germany of 1 percent and 3.75 percent inflation this year.

Far more worrying to industry leaders is the signal the deal has sent to private sector unions.

"No one really expects the metal and engineering workers, who have the biggest union in the country, to settle for less. The average [wage increase] for the private sector is now set between 5.5 percent and 6 percent," says Juergen Pfister, an economist with the Commerzbank.

Economic analysts say pay deals close to 6 percent would further strain Germany's competitiveness, already weak from high production costs.

This weekend, Franz Steinkuhler, chairman of IG-Metall reiterated the huge union would not settle for less than 6 percent.

So far, the employers have refused to budge from their 3.3 percent offer and have threatened to respond with lockouts if the workers go ahead with an all-out strike. Last week up to 120,000 metal and engineering workers took part in lightning strikes, and union leadership was due to decide this week on further action.

A metal and engineering workers' strike, which appears increasingly likely, would have a far more serious effect on the economy than public sector conflicts, as it would immediately hit key industrial sectors, including auto manufacturing and electronics.