Frankfurt/Main  - Agreement was reached late Saturday in negotiations over pay and other issues for 142,000 employees of Deutsche Bahn, according Norbert Hansen, a top personnel official at German rail.

The agreement followed a near 40-hour marathon negotiation session in Frankfurt and headed off threats of a looming strike.

The compromise calls for pay increases of 2.5 per cent as of Sunday and a second increase of 2 per cent on January 1, 2010. In addition, a one-time payment of 500 euros
(640 dollars) in December was made as part of the 18-month contract.

Panels on both the union side as well as German rail must approve the deal, but that is likely a formality.

German rail union Transnet head Alexander Kirchner said the employer had made concessions, including better working conditions, and he called the agreement a good sign for the economy.

Unions and German rail entered the fourth round of talks on Friday, when work schedules were a central issue. dpa