Bank economist calls for German wage restraint
Posted: 15 November 2009 0149 hrs

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BERLIN : Deutsche Bank's chief economist on Saturday called for pay restraint in Germany to protect the fragile jobs market.

Norbert Walter said pay rises in 2010 were likely to be between one and two percent, warning they and should be kept under tight control for several years to come.

Unemployment in Germany could rise as high as 4.5 million by January 2011, Walter told the popular daily newspaper Bild, and it could be 2012 before new jobs are created.

The head of Germany's national employment agency, Frank-Juergen Weise, told the Welt am Sonntag newspaper unemployment would rise in January and February.

In the same newspaper, Wolfgang Franz, who sits on a government advisory panel of economists that has predicted four million unemployed next year, said he feared tax rises may become necessary.

The panel has predicted 1.6 percent growth for the German economy for 2010, but said simple growth would not be enough to refloat public finances.

Sustained growth of an average of four percent per year for the coming years would be needed to achieve this, according to the panel.

Chancellor Angela Merkel has committed to tax cuts worth 24 billion euros (36 billion dollars) a year from 2011, gambling on a return to growth -- a plan which has been criticised in many quarters.

Data published Friday showed Germany to be well into recovery, with economic activity expanding by a provisional 0.7 percent in the third quarter from the previous three-month period.

- AFP /ls