Germany strike deal a bitter pill

GERMAN employers feel they have made a pact with the devil in offering a 4% pay settlement to the all-powerful IG Metall union. The deal ends a two-week strike - the country's longest for seven years - which has threatened the nascent economic recovery.

'It will kill jobs in Germany and constrain business opportunities in the German economy,' said Michael Rogowski, head of the German Industry Federation.

Bosses had previously offered 3.3% in response to the union demand for 6.5%. Even then, negotiators said that for many, the 'pain threshold' had already been passed. In a vague opt-out clause, the union said some workers could expect less if they were employed by a struggling company.

Some 17% of companies that the union is represented in are operating in the red and around 40,000 small-to-medium-sized enterprises will go to the wall this year.

Heinz Bruckmeyer, an industrial analyst based in Frankfurt said: 'Industry may have won the battle but could lose the war. The consensus is that this is a political solution to an economic problem and there could be a ripple effect across the EU.'