Employers scrap German pay deal

THE CAMPAIGN by industrialists to slow the process of automatic eastern German wage equalisation with the west took an explosive turn yesterday when the engineering employers' federation in the east announced it was unilaterally cancelling the existing wage contract.

'The extremely difficult economic situation in eastern Germany justifies the move - the first time in German history this has happened,' said the chairman of the Saxony region engineering employers' federation, Hans Peter Munter.

IG Metall, the powerful engineering union, described the move as a 'flagrant breach of the law', threatening strike action in retaliation.

In expectation of widespread protests, the employers' federation has already drawn up guidelines for confrontation. Dietrich Hochstatter, spokesman for Gesamtmetall, the national engineering employers' association, said: 'We have reached the showdown. All the signs point to things getting much rougher.'

Engineering employers in the east have been spearheading a campaign against agreements made in 1991 under which eastern German wages are being increased annually with the intention of reaching western levels by the end of 1994.

With production in the east in many industrial sectors still only one third that of western levels, the eastern wage equalisation commitment has been widely criticised as one of the biggest mistakes made by the government in the aftermath of unification.

The rapidly rising wage levels substantially increased the odds against survival for much of local industry, while also making the east less attractive for western German and foreign investors.

Yesterday's move shows that employers are now ready to flout the law in order to break the equalisation process, a decision that could have far-reaching consequences for Germany's finely balanced pay bargaining system.

According to the 1991 agreement in the eastern engineering sector, the 300,000 employees are to receive a 26 per cent wage rise on 1 April, taking them to 82 per cent of western levels. The employers said most firms could not afford this increase, and that if forced through it would threaten 70,000 jobs.

Yesterday the employers renewed their offer of a 9 per cent rise on 1 April, on condition that this maximum is paid only by 'those firms able to afford it'. The employers said the unions could either re-open negotiations to revise the wage accords, or take the issue to court.

Threatening to fight it all the way to the top, Mr Munter said: 'It could take up to three years to get a decision from the Federal Labour Court.'