UPDATE 1-German public sector workers win above-inflation pay rise

Sat Mar 9, 2013 7:42am EST

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BERLIN, March 9 (Reuters) - German's regional public service workers have won a 5.6 percent pay hike over two years, negotiators said on Saturday, another of the above-inflation rises intended to help the country's euro zone neighbours.

Germany's federal election in September has emboldened unions to push for higher wage increases as they expect politicians courting voters to back their demands.

Berlin is also under pressure from weaker euro zone economies, backed by the International Monetary Fund, to encourage Germans to spend more on goods and services from other countries in the currency bloc.

The unions had sought a pay increase of 6.5 percent for the 765,000 public sector workers. The deal, which will cost an estimated 5.6 billion euros ($7.3 billion) in total, applies to all regions of Germany except the state of Hesse.

"This is a good compromise," said Jens Bullerjahn, finance minister of the state of Saxony-Anhalt.

German inflation was running at 1.5 percent in February year-on-year, according to preliminary data, and is expected to average 2 percent over 2013.

Under the deal, salaries will rise by 2.65 percent this year and by a further 2.95 percent from January 2014.

But teachers could yet strike after the Easter holiday because their negotiators failed to clinch a separate agreement on the issue of salary differentiation.

Earlier this week, around 75,000 steel workers in north-west Germany won a wage hike of 3 percent for this year.

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