GERMANY: Germany is heading for a winter of discontent after pay talks collapsed between the government and the country's largest public sector union.
Arbitrators have been appointed in a last-ditch attempt to rescue the talks, which broke down early yesterday after a 15-hour all-night session.
The government has rejected the pay rise of over 3 per cent demanded by the Verdi union for its three million members. It also rejected the demand to increase salaries in the eastern federal states to levels in western states.
Verdi leader Mr Frank Bsirske called the government's last offer - averaging 1.2 per cent for 2003 in exchange for longer hours - "totally unacceptable", and threatened a "really massive strike" unless the offer was improved.
Mr Otto Schily, the Interior Minister and leader of the employer side at the talks, said the offer was fair, and criticised the union's "intransigent position".
The collapse of the pay talks comes after a week of one-day warning strikes that crippled Frankfurt airport and halted public transport in other major cities.
Germany is facing its worst economic crisis since unification in 1990 with a stagnating economy and unemployment nearing 10 per cent.
The public deficit has already breached the 3 per cent ceiling set down in guidelines to protect the euro, and Berlin has proposed new taxes and austerity measures to slash the deficit next year.
A pay claim along the lines demanded by unions would cost €6 billion, according to the government. That would swell the deficit and increase the risk of a huge fine from Brussels.
Despite its financial hardships, the government will be anxious to avoid a repeat of the 1992 general strike when household rubbish piled up on the streets for 11 days and sections of the country's bus and rail networks shut down.
A strike will only harden the mood of Germans already suspicious that the government hid the true extent of the country's economic problems until after election day last September.
