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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

Discussion Partners

John Arrowsmith: ECB / Regulatory

Tel: +44 7720 59 1726

Dr Michael Clauss: Germany Politics / Economy / Equities Sectoral Analysis
Tel: +49 89 64254046