Berlin - Germany's powerful IG Metall union said Tuesday it would seek an 8 per cent wage increase for 3.6 million workers in the key engineering industry, its highest demand in 16 years.

IG Metall boss Berthold Huber told journalists in Frankfurt that the demand was justified in view of the robust state of the German economy and the uneven distribution of its benefits.

He based the demand, which is well above German consumer inflation of around 3.3 per cent on the year, on price increases, increased productivity and strong profits in the sector.

"Yes, 8 per cent will hit profits, we are fully aware of that," he said, warning that the current economic uncertainty should not detract from the fact that the metalworking industry is a major component of Germany's highly successful export machine.

German trade unionists have long argued that while workers showed restraint through a long economic slowdown at the beginning of the decade, they have not seen any rewards for the upswing over the past two years.

Industry bosses have dismissed the demand as unrealistic. The first round of negotiations starts on October 2 for workers in three of Germany's 16 states. IG Metall ruled out any industrial action before the end of next month.

Norbert Walter, chief economist at Deutsche Bank, Germany's biggest bank, said the danger from pay hikes was real. If pay were to rise sharply, "the outcome will be inflationary effects in the short term and probably a weakening in growth," he said.

European Central Bank (ECB) President Jean-Claude Trichet warned recently of the threat of a wage-price spiral and urged workers not to make high pay demands. (dpa)