German Pay Talks Get Tense

-- With German unemployment nearing 12%, the bargaining over municipal workers' pay was bound to be tense. But the Mar. 2 nomination of Gerhard Schroder as the Social Democratic Party's candidate for Chancellor in September is adding spice. Striking garbage collectors and bus drivers are demanding 4.5% wage hikes, perhaps emboldened by the prospect of a new government.

But economists say the workers are likely to get only inflation-matching raises of 1.5% to 2%. State and local governments will hang tough because their deal will set the benchmark for other contracts this year, including those in retail and construction. Union leaders may go for a modest, short-term contract now, hoping to win a better deal if Schroder wins.

Before it's here, it's on the Bloomberg Terminal.