The European Central Bank supports Germany's Bundesbank in its appeals for higher wage deals in Germany, Der Spiegel magazine quoted ECB chief economist Peter Praet as saying yesterday.

Low wage agreements were needed in some crisis-hit euro zone countries to bolster competitiveness, the magazine quoted Praet as saying. By contrast, in countries such as Germany where "inflation is low and the labour market is in good shape", higher earnings increases were appropriate, it reported. This would help to bring average wage developments in the euro zone in line with the ECB's inflation target of close to 2 per cent, his argument continued, said Der Spiegel.

The Bundesbank historically has been a strong advocate of wage restraint, but with euro zone inflation stuck below 1 per cent and consumer prices rising just 1.0 per cent in June in Germany, Europe’s biggest economy, some fear deflation.

Bundesbank chief economist Jens Ulbrich has been reported by German media to have encouraged trade unions to take a more aggressive stance in wage negotiations given low inflation.In April, 2.1 million public sector workers agreed to a 3.0 per cent pay rise for this year and 2.4 per cent for next.–(Reuters)