Settlement Reached in Landmark Strike : Germany: Employers in eastern section’s metal industry agree to wage hike and other demands. Ratification is expected.

The first official strike in the former Communist eastern region of reunified Germany appeared to have ended Friday after metalworking industry employers agreed to meet a series of key union demands, including a 26% wage increase.

The tentative agreement, reached after a marathon 21-hour negotiating session between union and employers’ representatives in the large eastern state of Saxony, is expected to be quickly ratified, then accepted elsewhere.

Under terms of the accord, employers agreed to meet union demands for a major pay increase as part of a multi-year timetable to raise eastern wages to equal the levels in the more prosperous, productive west.

To the surprise of those monitoring the talks, eastern employers also agreed to a legally binding set of dates for future increases in wages and fringe benefits.

As recently as last Monday, Werner Riek, chief spokesman for the metalworking industry employers association, Gesamtmetall, specifically rejected the idea of binding dates, saying the present dispute was proof that such commitments were foolhardy.

One of the few concessions employers wrung from unions during the 12-day strike was to spread the increases over a longer period than that set out in the original agreement, which the employers unilaterally suspended last February.

The 26% increase, for example, will not be retroactive to April 1, as called for in the original contract, but will be paid in three phases through December. The final goal of wage equalization has been pushed forward to as late as mid-1997.

Jens Kort, spokesman for Saxony’s regional employers association, admitted that paying higher wages in the midst of a recession would be difficult for his members, but he said the time extensions would ease the hardship.

“We were under the pressure of a strike,” he said. “It was the best we could get.”

At the national headquarters of the giant metalworkers union IG Metall in Frankfurt, officials celebrated the pact as a major victory.

Union chairman Franz Steinkuehler talked about “smashing the employers’ attempts to alter the course of industrial relations,” while others issued equally triumphant statements.

“They tried to blackmail us, using the recession and high unemployment rate, and it didn’t work,” said IG Metall spokeswoman Dagmar Opoczynski about the employers. “We have won.”

The impact of the apparent settlement on the region’s longer-term investment prospects, however, would seem to give less reason for worker euphoria. While labor costs will become among the world’s highest, productivity in the east is expected to take far longer to catch up to western levels--a combination likely to make eastern Germany unattractive to investors.

It was not immediately clear why the employers suddenly gave in to demands that they had only days earlier insisted would mean hardship and possible bankruptcy for many companies. But a series of token stoppages earlier this week in key western plants, including Mercedes-Benz, Volkswagen and Siemens, plus the expected expansion of the strike to three additional eastern states scheduled for Monday, certainly played a role.

The unusually solid support for the strike at a time of deepening recession appeared to unnerve employers.

The present strike, the first in eastern Germany in over 60 years, was caused by the employers’ decision last February to suspend the four-year contract that still had more than two years to run. They said that they could not meet a timetable of pay hikes that would raise eastern wages to western levels by April of next year.