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Hungarian companies and workers fail to reach wage agreement

Hungarian trade unions and corporate leaders failed today to reach an agreement on this year's wage increases, leaving just five days to compromise and avert labor stoppages.

Talks will continue on January 30, one day before the deadline. Employers propose raising wages by 5% to 8%, according to Ferenc Rolek, their spokesman. Workers are demanding at least 6%, said János Borsik, a union leader. Hungary's government wants to curb wage increases to rein in inflation that is set to accelerate to the fastest pace in six years. The ability to contain consumer prices hinges on wage increases and failure to curb spending power may result in higher interest rates, the central bank said. „The pace of wage inflation is higher than expected,” said Henrik Auth, a deputy president at the bank, after voting with the minority to raise interest rates to 8.25% on January 22. Gábor Oblath, another policy maker who has rejected the need to raise rate on January 19 said a decline in nominal wages would be a key indicator for curbed inflation expectations. Wages after taxes were 3.8% higher at the end of November than a year earlier. Inflation is accelerating because of government measures aimed to curb the European Union's widest budget deficit. Prime Minister Ferenc Gyurcsány has raised taxes and increased utility bills by cutting subsidies for products such as natural gas and electricity.

Consumer prices at the end of last year were 6.5% higher than in December 2005. The inflation rate may rise higher than 10% this year, for the first time since 2001, central bank Governor Zsigmond Járai said on January 19. Employers estimate that the austerity measures, which included higher corporate income taxes and health-care contributions, will cost companies a combined 700 billion forint ($3.5 billion) this year, Rolek told reporters during a meeting with worker groups. Corporate leaders seek to center the wage-proposal range around the government's forecast of 6.25% average annual inflation this year, he added. They also asked unions, including workers at state-owned bus transport companies who are planning to strike on January 29, to refrain from labor action.

„The strike on Monday would be considered as a very unfriendly move,” Rolek said. „This is an agreement that they must accept. Wages rising more than that would be unrealistic, given our companies' situation.” Unions want to raise the lower limit to make sure no wages rise less than consumer prices. Hungary's economic growth is likely to exceed the government's 2.2% target this year, which should create room for higher wages, said János Borsik, a spokesman for the workers. „The unions didn't accept the” budget „plan and won't expect declining real wages because that's unjustified,” he said on the sidelines of the meeting. „The chance for agreement is close. All the employees have to do is go from five to six.” The government is proposing an agreement of setting the band at between 5.5% and 8%, said Gábor Csizmár, a deputy minister at the labor ministry. Both sides said they needed the approval of member organizations for that. (Bloomberg)