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Draghi Tested as German Pay Deals Add to Euro Divergence

Wage moderation in Germany may be coming to an end at precisely the wrong time for European Central Bank President Mario Draghi.

As nations from Greece to Spain battle recessions and record unemployment, workers in Germany are winning some of the biggest pay increases in two decades, with public service staff set to gain 6.3 percent more by the end of next year. That’s widening the gaps between Europe’s largest economy and its euro-area peers, making the ECB’s one-size-fits-all monetary policy less effective.