Economist Holger Sandte at Nordea believe...>

GERMANY: Economist Holger Sandte at Nordea believe that the upcoming IG Metall

wage talks doesn't "expect the pace of pay increases to rise much, if at all"

- This is because this is a complicated deal as the Union pushes pay demands

alongside a decline in working hours. 

- Sandte points out that the previous 21-month agreement worked out as a

annualised 2.5%Y/Y rise over the whole period. This time "Germany's biggest

labour union, demands a considerable pay increase (this time probably 6%, up

from a +5% claim in 2016)". Additionally IG Metall demands that all employees

have the right to reduce working hours to 28 hours for up to two years, with the

right to return to 35 hours.

- Nordea also write that "Experience tells us that in good times the wage

agreement is about half of IG Metall's claim, but less if the union is

successful with non-wage issues".

- How does play out? "The upshot is that we expect a wage agreement closer to

2.5% than to 3% on an annual basis, assuming there will be an agreement about

more flexible working hours."