Frankfurt  - Union leaders said Wednesday they reached agreement with employers on a pay deal for 3.6 million workers in Germany's engineering industry.

The breakthrough came during marathon talks lasting more than 24 hours and averted the threat of an all-out nationwide strike.

Under the terms of the deal between employers and powerful IG Metall union, workers will receive a 2.1 per cent increase on February 1, 2009 and another 2.1 per cent hike three months later.

In addition there will will be a one-off payment of 510 euros (637 dollars) for November and December 2008.

The union, which had been seeking 8 per cent, staged a week of token strikes from November 1 to press their demands.

It threatened to ballot its members for an all-out stoppage if the negotiations which began Tuesday failed to achieve a result. (dpa)