FRANKFURT - An all-out strike was averted on Wednesday in Germany's key steel industry when employers and unions hammered out a wage agreement that could be used as a yardstick for other sectors of industry.
Under the terms of the deal, struck after six hours of last-ditch talks in the city of Dortmund, 85,000 west German steel workers will see their wages increased by 3.5 percent from September 1.
And for the period from April to August, they will receive a one-off payment of 500 euros (645 dollars).
"We're very satisfied," said IG Metall's chief negotiator Detlef Wetzel. This was "an extraordinarily good result and a fair compromise."
No other sector had reached a comparable agreement. Nevertheless, the talks had been very hard, Wetzel said.
The union's original demands had been for wage increases of 6.5 percent in face of companies' runaway profits and booming worldwide demand for steel.
IG Metall had even wanted to ballot its members over possible all-out strike later this month in pursuit of those demands.
The strike ballot was to have taken place between May 13 and 19, with the walkouts scheduled to start as early as May 23 in what would have been the first full-scale industrial action in the sector in more than 25 years.
Employers, who had been offering a pay rise of 2.4 percent over 19 months and a one-off payment of 800 euros, were less enthusiastic about the result.
"We would have sensibly wanted to reach a different compromise," said the head of the Stahl employers association, Helmut Koch. "Unfortunately, we were not able to achieve what we wanted."
And the president of the Gesamtmetall employers' federation Martin Kannegiesser also said that the pay increase was too high.
"Even if the sector is doing well at the moment, a pay rise of 3.5 percent is out of proportion," Kannegiesser said on German radio RBB.
Given the danger that the current boom might prove only temporary, it would have been better to have made a one-off payment to employees and awarded them a smaller nominal wage increase, Kannegiesser argued.
Roland Doehrn, the steel sector expert at the Essen-based economic think-tank RWI, warned that there were already signs of cooling worldwide demand for steel and the wage deal could actually cost jobs in Germany.
But the employers could live with the wage deal, said Stahl chief Koch.
"What's important is that we've been able to avoid labour dispute in our industry."
The country's biggest steel maker, ThyssenKrupp, described the wage agreement as "painful, but just about tenable".
An all-out strike would have jeopardised supplies to customers, a company spokesman said. And the so-called "social peace" had been maintained in Germany.
"A labour struggle could have put the brakes on the desparately needed economic upturn," ThyssenKupp said.
Smaller rival Salzgitter was more critical.
"The price of averting a strike has been a high one," said chairman Wolfgang Leese.
The 3.5-percent pay increase was the uppermost limit and "will bring with it substantial burdens for our company which will now have to increase productivity even more to remain competitive with foreign rivals," Leese said.
Analysts estimate that the wage deal will increase production costs by about one percent.
ThyssenKrupp shares were showing modest gains of 0.42 percent at 14.36 euros on the Frankfurt stock exchange and Salzgitter shares were up 0.86 percent at 16.43 euros.
It had been the employers who had initiated the last-ditch talks following the decision by IG Metall's leadership to proceed with a strike ballot, even though the union had insisted it was prepared to return to the negotiating table at any time right up until the strike ballot.
IG Metall intended to inform its members of the agreement later on Wednesday. The union's wage commission would then meet on Thursday to discuss calling off the strike ballot.
The deal for the west German steel sector would also be the yardstick for separate wage negotiations for eastern Germany, as well as for the Saar region.
The head of the BDA industry federation, Dieter Hundt said that the pay deal was blackmailed out of the employers by unions and could actually lead to additional job cuts.
And the deal should in no way be transferred to other sectors such as the chemicals, printing, retail and wholesale industries, Hundt insisted.

05/11/2005 11:50 GMT