German engineers meet for crunch wage talks

SINDELFINGEN, Germany, May 3 (Reuters) German engineering employers and trade union officials met today for make-or-break pay talks in the state of Baden-Wuerttemberg that could set a benchmark for pay deals across the country.

The powerful IG Metall union, Germany's largest, raised pressure on employers ahead of the latest round of negotiations with fresh temporary stoppages and threatened large-scale industrial action if a deal is not reached soon.

Tens of thousands of workers in the engineering and metalworking sector, which produces many of the German export goods in demand around the world, have already staged brief walk-outs over the last week.

''Today we have the last chance, without (major) strikes, to reach a negotiated result,'' Joerg Hofmann, IG Metall chief in the south-western state, told reporters before the start of the talks in the town of Sindelfingen.

Hofmann rated the chances of a wage deal as 50-50.

Metals and engineering sector wage deals reached in Baden-Wuerttemberg have in the past acted as a pilot for the industry nationwide, though last year North Rhine-Westphalia set the tone for the rest of the country.

Employers have offered the 3.4 million workers in the sector a 2.5 percent fixed pay raise, plus a one-off sum equivalent to a 0.5 percent rise.

IG Metall has rejected this, saying that workers in less successful industries like construction and the chemicals sector have already secured bigger wage increases this year.

Carmakers DaimlerChrysler, Porsche and Audi, truck maker MAN and French-American telecoms equipment company Alcatel-Lucent are among the firms hit by temporary stoppages so far.

IG Metall said large scale industrial action could follow.

''Either we reach a deal in the coming days that we can support and that we want, or we decide in mid-May whether there will be industrial action,'' the union's deputy head, Berthold Huber, told the Tagesspiegel newspaper.

Analysts expect IG Metall to push for a rise of at least 4 per cent, due to big productivity gains the industry has made in recent years. Employers are expected to resist such an increase unless the contract lasts significantly longer than 12 months.

IG Metall chief Juergen Peters declined to give a figure the union could agree to when asked by Deutschlandfunk radio.

IG Metall's demand for better pay has been bolstered by Germany's strongest economic growth in six years in 2006 -- 2.7 per cent. The country's leading economic think tanks have forecast only a marginal slowdown in growth through 2008.

The European Central Bank has urged unions to accept moderate pay rises or risk boosting inflation.

The head of employers' group Gesamtmetall said in an interview yesterday he hoped a deal would be reached soon.

''All the arguments have been exchanged, all building blocks for a solution are on the table,'' Gesamtmetall chief Martin Kannegiesser told the Frankfurter Allgemeine Zeitung daily. ''We are ready (for a deal) and expect the same from IG Metall.'' Reuters RS DB2145