EZA 934 /19Feb10: German wage agreement raises the bar for euro area competitors
- On 18Feb the German metal working industry came to a new wage agreement which provides for an annual nominal wage increase of 1.4% from May 2010 through to March 2012.
- Comprehensive provisions for job protection, including extended short time and reduced working hours were also included in the agreement.
- Both the negotiations and their outcome have been heralded as groundbreaking in terms of flexibility, job retention and jobs in general.
- However, the agreement relies on government commitments to wave social taxes, indirectly involving the government in the wage deal - at odds with the principle of independent wage negotiations practiced in post war Germany. This raises the issue of government involvement going forward – although it is hard to conceive politicians becoming directly involved in wage setting (as in France).
- The agreement can be regarded as positive for German competitiveness, lifting the benchmark for other euro area economies.
Asset conclusions: strong signal of wage moderation in Germany positive for German stocks and core European government bonds.
Please see the attached from Michael Clauss as a pdf file to read onscreen or simply print and read at your convenience.
Dr Michael Clauss: Germany Politics / Economy / Equities Sectoral Analysis
Tel: +49 89 64254046
michael.clauss@eurozoneadvisors.com
Discussion Partners
John Arrowsmith: ECB / Regulatory
Tel: +44 7720 59 1726
john.arrowsmith@eurozoneadvisors.com
Dr Michael Clauss: Germany Politics / Economy / Equities Sectoral Analysis
Tel: +49 89 64254046
michael.clauss@eurozoneadvisors.com
© Eurozone Advisors Ltd
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