German central bank back real pay rises

Jens Weidmann, head of Germany’s Bundesbank, an institution long known for its determination to combat inflation, has backed pay increases of around 3% at a time when German prices are rising by 0.8% (July).

Weidmann told the conservative FAZ newspaper the fact that “pay was again rising more strongly is to be welcomed”. He saw overall increases of 3%, reflecting 2% inflation and 1% productivity growth, as justifiable and not a threat to economic stability.

Weidmann has been criticised by the employers in the metalworking industry, where negotiations on a 2015 increase are due to start shortly. However, Stefan Schaumburg, head of the pay department at the IG Metall union, has said that the bank’s calculation produces the right figure for neutral pay growth.

“Why shouldn’t we be pleased when, for once, they agree with us?” he added.

http://uk.reuters.com/article/2014/07/30/uk-germany-wages-weidmann-idUKKBN0FZ03U20140730