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Inflation bites into German 2017 real wages

BERLIN, March 23 (Reuters) – Higher consumer inflation in 2017 resulted in German wages posting their weakest increase in four years, data showed on Friday, easing some negative risks for the European Central Bank as it seeks to curb its stimulus.

Real wages rose by 0.8 percent last year, lower than the 1.8 percent recorded in 2016. Consumer prices in Europe’s largest economy rose by 1.8 percent last year, more than the half a percentage point increase in 2016.

In nominal terms, wages rose by 2.5 percent last year, more than the 2.3 percent recorded in 2016.

Real wages in Germany have been rising since 2014 as a consumption-led upswing, a robust labour market suffering from shortages and healthy corporate revenues emboldened unions to fight for more generous salary deals.

German labour union IG Metall and a key employer group agreed last month on a 4.3 percent wage rise spread over 27 months, setting a benchmark for millions of workers in Germany.

Trade unions have also demanded a public sector pay increase of 6 percent for the more than 2 million civil servants and other employees of the federal government and municipalities, which have rejected the rise, saying it was too high.

Unions and government representatives are still negotiating a compromise in talks expected to last weeks.

Weak wage growth has been the biggest obstacle in lifting inflation back to the ECB’s target rate of almost 2 percent.

Having bought over 2 trillion euros worth of bonds to keep borrowing costs low, the central bank is now looking to end the buying as the euro zone economy steams ahead. (Reporting by Joseph Nasr Editing by Alison Williams)

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