German pay clash looms

Difficult negotiations are in prospect for the 3.2 million German workers covered by the pay agreement for the public sector.

Their union, Verdi, has called for an increase of "significantly more than 3%", while the government has said that any increase at all will result in a loss of jobs. The union, which is Germany's largest, has moved away from making high demands, of around double the final figure, and has made it clear that it expects a settlement close to what it is asking for.

The government is under pressure to cut public spending to bring its deficit under the 3.0 % set by the European Union stability and growth pact. Inflation was 1.3% in October.