UPDATE 1-German engineering sector agrees two-stage wage hike

MUNICH Wed May 15, 2013 3:18am EDT

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MUNICH May 15 (Reuters) - Germany's IG Metall engineering union secured a deal with employers on Wednesday for a two-stage wage increase for metal and electrical workers in Bavaria which will serve as a basis for a nationwide agreement for 3.7 million employees.

Engineering workers in the southern state will get a 3.4 percent increase in July, followed by a 2.2 percent hike in May 2014. The agreement runs for 20 months and averts the prospect of protracted strikes in the sector.

Four months before an election in Europe's biggest economy, unions have been pushing for inflation-busting wage hikes, confident politicians will back them. Annual inflation was running at 1.2 percent in April, preliminary figures showed.

Economists and other euro zone leaders have called on German politicians to do what they can to boost domestic consumption and keep the German economy - Europe's growth engine - strong.

Data released on Wednesday showed Germany only just eked out some growth in the first quarter of the year, due partly to the long, cold winter, although most economists expect an improvement during the year.

The union had called for a wage hike of up to 5.5 percent for sector workers from May and had staged a series of warning strikes. It rejected an initial offer from employers for an increase of 2.3 percent from July.

"It's a fair compromise," IG Metall head Berthold Huber said, adding the metal and electrical sector served as a crash barrier in very volatile economic times.

It is unusual for the southern state of Bavaria, home to big companies including conglomerate Siemens, carmaker BMW, truckmaker MAN to strike the pilot deal. In previous years the south-western state of Baden-Wuerttemberg has been the first to agree.

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