Germany hit by construction strike

Cranes came to a standstill on construction sites across the north of Germany

BERLIN, Germany -- German construction workers have gone on strike for the first time in Germany's post-war history in a pay dispute that could jeopardise Chancellor Gerhard Schroeder's chances of re-election.

The IG Bau union members, which represent about a third of the country's estimated 860,000 builders, saw its members down tools in Hamburg and Berlin and other northern German towns on Monday in support of its 4.5 percent pay claim.

Further disruption, which will target larger construction sites, is being planned in other parts of the country each day a settlement goes unsigned.

The move threatens to further halt Germany's economic recovery and unhinge Schroeder's election campaign this summer.

The construction industry has acted as a drag on the German economy as other European Union nations slowly move out of a general downturn, Elga Bartsch, analyst with Morgan Stanley told CNN.

CNN NewsPass VIDEO CNN"s Stephanie Halasz reports Germany's construction union is seeking a 4.5 percent wage increase as it strikes for the first time in 50 years (June 17) Play video

Turnover in the construction sector fell by 10.6 percent in the first quarter of 2002 compared to the same period last year.

"It is really holding back the economic performance," Bartsch added.

Employers, who have offered a three percent pay rise beginning in September with a one-off payment of 100 euros in August, have said the strike is irresponsible.

"The economic damage is going to be massive," Michael Knipper, Managing Director of the construction employers' association told Reuters.

Bosses estimate the strike could cost 20 million euros ($18 million) per day.

The union, which boasts 340,000 workers in the sector, said more than 98 percent of its members voted in favour of industrial action after talks with an independent mediator broke down in May.

"We're going to expand the strike every day as long as they refuse to make a new offer," IG Bau leader Klaus Wiesehuegel told Reuters news agency.

The strike will spread to southern Germany on Wednesday and nationwide by next Monday if talks do not resume, Wiesehuegel added.

It wants the 4.5 percent rise for members whose contracts ended in March.

Workers point to a recent pay settlement for members of the engineering IG Metall union which was in the region of four percent.

But construction bosses say the engineering sector has had a relatively lucrative past few years unlike the construction industry which has seen orders drop by 2.3 percent in the first quarter this year, mainly in the former eastern part of the country.

About 500,000 jobs have been lost in the sector since 1995.

Schroeder has always courted the workers' vote and urged sensible pay deals, but another strike could damage his reputation for being able to handle the economy.

CNN's Stephanie Halasz said Schroeder was in a "difficult position" -- trying to appease his traditional supporters but on the other hand being aware of the economy's fragile condition.

The chancellor has trailed his conservative opponent Edmund Stoiber in the opinion polls in the run-up to September's election.