IG Metall, Germany’s biggest union,
won a pay deal in the state of Bavaria that exceeds the rate of
inflation, setting a benchmark for a national accord.

In talks ending early today, the union and the Gesamtmetall
employers group agreed to a 5.6 percent pay increase over 20
months for the region’s 770,000 workers. Prices will rise less
than 2 percent in 2013 and 2014, according to forecasts
compiled by Bloomberg. IG Metall has demanded a 5.5 percent
one-year increase for its 3.7 million members nationwide.

The terms, raising pay at companies including Siemens AG (SIE)
and carmaker Bayerische Motoren Werke AG (BMW), were “far-sighted
and fair,” Gesamtmetall’s President Rainer Dulger said in a e-mailed statement. Negotiators brushed aside “dusty ritual to
broker an accord at record speed,” the statement added.

Higher incomes may help Chancellor Angela Merkel and
Bavarian Prime Minister Horst Seehofer in an election year.
Bavaria goes to the polls in a regional vote one week before the
nation in September.

The union stepped up selective action this week in support
of its pay claim including stoppages by 130,000 workers at 600
businesses yesterday. Amid weak economic growth, IG Metall and
employers will take account of industry’s regional strengths and
weaknesses in weighing a national accord.

Germany’s economy grew just 0.1 percent in the first
quarter, the Federal Statistics Office said today. The economy
of the euro area, Germany’s biggest export destination, is
slated contract for the second consecutive year in 2013. Private
consumption may grow by just 0.6 percent this year, the Economy
Ministry said on April 25.

IG Metall Workers in the state will be paid 3.4 percent
more pay from July 1 this year and 2.2 percent more from May 1,
2014, the union said. The accord will expire in December next
year.

Unemployment in Bavaria in April fell to 3.9 percent.
Germany as a whole reported an average rate of unemployment of
7.1 percent last month.

To contact the reporters on this story:
Brian Parkin in Berlin at
bparkin@bloomberg.net;
Alex Webb in Munich at
awebb25@bloomberg.net

To contact the editor responsible for this story:
James Hertling at
jhertling@bloomberg.net