Berlin - Key industrial employers in Germany offered 800,000 workers in and near the carmaking city of Stuttgart a wage rise of 2.1 per cent Thursday as pay bargaining hung in the balance.

The militant IG Metall trade union announced weeks ago that it was seeking a hike of 8 per cent, prompting an indirect rebuke from the European Central Bank, which said it feared a wage-price spiral.

Since then, world stock markets have crashed and fears have grown that Germany's all-important exports of cars, trucks and industrial plant may soon dive as global demand softens.

Stefan Roell, head of the South-West region of Germany's engineering industry employers association, said the pay offer would be sweetened with a one-off payment of 
1.6 per cent of gross wages at the end of this year.

Referring to fears that Germany cannot afford pay hikes as a global recession looms, he said: "This does not endanger our competitiveness."

But his IG Metall opposite number, Joerg Hofmann, rejected the offer as "not conducive to a settlement."

IG Metall in the south-west is Germany's trend-setter in wage-fixing, striking deals that are usually copied by manufacturing industry elsewhere in the country and emulated in other business sectors where unions are less militant.

Nationwide, IG Metall represents 3.6 million workers, not all of them card-carrying union members.

The two sides are set to resume formal negotiations on November 11. IG Metall has indicated in the past it might strike to put more punch behind its pay demand. (dpa)