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RTRS-Deutsche Bahn warns wage deal will kill jobs

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BERLIN, Jan 15 (Reuters) - An 11-percent wage increase that German rail workers secured after nearly a year of tortuous negotiations will kill jobs, raise costs and harm the economy, Deutsche Bahn chief executive Hartmut Mehdorn said on Tuesday.

In a gloomy assessment of the provisional deal’s impact on the railways and potential damage to Europe’s largest economy, he said the agreement -- coming as talks in other sectors begin

-- would lead to higher ticket prices and site closures. -- would lead to higher ticket prices and site closures.

Estimating the overall cost of the GDL deal and its knock-on effect for two other larger unions -- Transnet and GDBA -- at the company at more than 1 billion euros ($1.5 billion), Mehdorn said that sum would have to be offset over the next five years.

But Mehdorn also announced that Deutsche Bahn, Germany’s largest employer, had another record-breaking year in 2007 with more passengers and freight transported than ever before.

“The agreement with the GDL train drivers union is anything but a victory for reason,” said Mehdorn, countering a widespread sense of relief across Germany over the deal after 10 months of talks and crippling strikes by the union’s 34,000 members.

“It is a defeat, not only for Deutsche Bahn but also for Germany as a place to do business. This agreement is pure and simple damage limitation to prevent any further strikes costing millions of euros. The price for that was high.”

Chancellor Angela Merkel welcomed the agreement, which was hammered out thanks to some arm-twisting by Transport Minister Wolfgang Tiefensee, between state-owned Bahn and the union.

But the two larger railworkers’ unions, who also stand to benefit from the GDL’s successful battle for higher wages, criticised Mehdorn’s threat to eliminate jobs as a result and warned they were ready to strike to block any job cuts.

The union said they helped the Bahn become a profitable company after decades in the red and in the run-up to a planned partial privatisation. They accepted modest wage increases and cooperated with painful restructuring measures in recent years.

“The railway workers are ready to fight for their jobs,” Transnet chairman Alexander Kirchner and GDBA deputy chairman Heinz Fuhrmann said in a joint statement. They said they would use “all available means” -- including strikes.

SIGNAL FOR OTHER UNIONS?

Economists have warned the Bahn deal could embolden unions in other sectors to push for larger salary increases, raising the prospect of a wage spiral that could lead to higher interest rates from the European Central Bank.

Political leaders in Germany have put aside their usual caution about intervening in wage talks this year, saying workers deserve a greater share of improved corporate earnings.

The 11-percent increase in two steps that the GDL has negotiated is one of the highest settlements in years and could well be a standard other unions will be measured by.

Verdi, representing over a million public sector employees, started wage talks last week with demands for an 8 percent raise, their highest claim in many years.

Unions across Europe’s largest economy are eager to reap the benefits of strong growth and robust corporate profits.

“The agreement goes far beyond anything that could be considered financially sound and it will have serious consequences for Deutsche Bahn and Germany,” Mehdorn said.

(Additional reporting by Sabine Siebold; Editing by Ibon Villelabeitia)

((Berlin newsroom, +49 30 2888 5210)

($1=.6724 Euro) Keywords: GERMANY RAIL/JOBS

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