German wage negotiations not a major threat to inflation

Wage negotiations begin in Germany today between employers and the services and public sector unions Ver.di and DBB. The unions’ demands for an 8% pay rise have raised concerns over the buildup of a nasty wage-price spiral, particularly as both have cited the recent rise in inflation as one justification for such a pay rise. But although such fears are understandable, we think that there are a number of reasons not to be too worried.