German retail sector agrees wage hike in key state

German employers and unions in the retail sector in the southwestern state of Baden-Wuerttemberg have agreed a two-stage 5.1 percent wage increase over 24 months, a deal that could set the tone across Germany.

After months of negotiations and strikes, both sides agreed an initial hike of three percent backdated to July for more than 220,000 workers, with an additional rise of 2.1 percent from April next year, service workers trade union Verdi said.

Employers had in June offered nearly 3 million workers nationwide in the German retail sector a two-stage 3 percent wage hike, an offer Verdi rejected.

Employers and unions in the retail sector in other German states have yet to reach wage deals. Verdi called upon workers to go on strike in Berlin and Brandenburg on Thursday, ramping up pressure on employers during the key Christmas season.

German workers in other sectors have achieved increases that have been significantly higher than the inflation rate this year. For a factbox on major German wage deals, click on

Economists say that by increasing labour unit costs, such deals reduce German competitiveness, helping to even out imbalances within the euro zone, where many countries are under pressure to carry out internal devaluations.

They might also encourage Germans to spend more on goods and services from weaker euro zone economies, boosting growth at home and in the bloc as a whole. Domestic demand has been a driver of growth in Europe's largest economy this year.