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Fears over German public sector pay

German public sector workers on Monday received an 8 per cent pay increase spread over two years, in a wage deal likely to heighten concerns in the European Central Bank over inflationary pressures in Europe’s largest economy.

The settlement – the highest in the public sector since 1992 – is the latest in a string of above-inflation wage agreements in Germany in recent months, marking a clear break with the belt-tightening of previous years.

Wolfgang Schäuble, interior minister and chief government negotiator, said the increase was costly but acceptable because public service employees such as nurses, rubbish collectors and transport staff “have a right to a fair share in Germany’s positive economic development”.

His comments – in line with other government statements in recent months backing big wage increases – are likely to worry the ECB, which fears a spiral of higher costs leading to higher wage settlements. German inflation leapt to 3.2 per cent last month, compared with 2.9 per cent in February, according to official figures last week.

The pay settlement, covering

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