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German pay rises at fastest rate in over a year

Berlin - The pay of about 19 million German workers covered by collective wage agreements rose at the fastest rate in more than a year in the second quarter, the federal statistics office said on Friday.

Wages rose an average 2.6% from the same quarter a year ago, the biggest increase since 3.0% growth in the first quarter of 2013, the statistics office said. Pay rose at more than double Germany's 1.1% inflation rate over the period - an advance over recent years, when German pay raises often lagged behind inflation.

The 19 million Germans covered by collective wage agreements represent nearly half the country's workforce of about 42 million people

Germany is Europe's largest economy, but it has come under criticism for modest wage growth. European Employment Commissioner Laszlo Andor said recently German pay was not rising fast enough and the government should ensure salaries rose in line with productivity.

Some economists and officials have supported the case for higher German wages as a way of reducing Berlin's competitive advantage over other euro zone members and ironing out imbalances across the region.

Years of wage restraint, along with labour market reforms, have boosted Germany's economy. There have been recent signs of rising pay, supported by unions and by some economists, who say higher wages will improve domestic demand and help the faltering euro zone recovery.

In real terms, wages fell in 2013 for the first time in four years, partly due to a decline in bonuses and one-off payments. But they rose by 1.3% in real terms between January and March 2014 compared with the same period in 2013 - their biggest increase in almost three years.

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