By Luiza Ilie
BUCHAREST, May 5 (Reuters) - When thousands of workers went
on strike last month at Renault's <RENA.PA> Dacia plant in
Romania to demand a 70 percent rise in salaries, labour unions
across the country sent representatives to join the protest.
The three-week strike led to a 23 percent pay hike for Dacia
workers, more than double the management's initial offer, and
signalled that already strong wage pressures are heating up as
seen elsewhere in the region this year.
From miners in Poland to utility workers in Bulgaria, unions
across central and east Europe have demanded large pay hikes as
they feel the squeeze from record global food and oil prices.
In Romania, double-digit wage growth is seen as a key threat
to long-term economic stability, as the country struggles with
rampant consumption that has bloated its external cash deficit.
Elsewhere in the region, worries about inflation and losses
in competitiveness are growing fast.
"We are not as competitive as we were a few years ago and if
labour force costs continue to rise strongly we will become less
and less attractive," said Ionut Dumitru, head of research at
Raiffeisen Bank in Bucharest.
Poverty, disillusionment with the slow pace of reforms that
have brought Romania into the European Union last year and
widening wealth differences in the fast-growing economy have
powered demands for higher salaries for years.
Now, pay claims have received a new push due to infighting
among political parties and an upcoming parliamentary election
later this year, coupled with rising inflation and energy costs.
"The shock in citizens' pockets will be big," said Bogdan
Hossu, head of the powerful Cartel Alfa, one of Romania's
largest labour unions.
"Let's be realistic, these potential social pressures will
be stronger than in the previous year because of the election."
Ovidiu Jurca, a senior official at the National Union Bloc,
warned more labour strikes were likely to follow in "every
sector where there is a strong union and an employer who forgets
... the good practice at European levels".
"There are a lot of unsolved issues in the public sector, or
in transport or manufacturing," he told Reuters.
WANTING MORE
The Dacia protest was followed by a strike at Romania's top
steel mill, owned by giant ArcelorMittal <ISPA.AS>, where a
third of the workforce demanded better pay. Truck drivers and
police officers also rallied separately in April to demand
improved legislation and infrastructure.
In Poland, where emigration has tightened the labour market
sharply, miners have won a 10 percent wage increase following a
46-day protest in February. The government sees average salaries
there growing 12 percent this year.
In Bulgaria, 2,700 workers at Czech power firm CEZ
<> were given a 25 percent pay increase after a strike
and in Hungary, where average wages have jumped 13 percent since
last year, wage hikes are a key concern for the central bank.
The International Monetary Fund has warned about secondary
effects of wage growth on the economy throughout the region and
called on governments to shun excessive pay, saying wage demands
within the public sector are spilling into private enterprise.
But analysts say there is little chance that Bucharest's
minority government will be wage-tight as its public support is
at a low level ahead of the ballot, due in the fourth quarter.
In particular, observers warn that talks on the 2009
government budget, which should be submitted ahead of the
election, may be an opportunity for more giveaways and a new
debate on hikes in the minimum wage.
Earlier this year, the transport ministry averted a general
rail workers' strike by consenting to a 13 percent raise. The
government is committed to capping public sector wage growth at
10 percent on average this year.
One way for the government to increase benefits without
breaching the salary cap is to grant bonuses, which in turn
could increase demands on private employers, observers say.
First signs of such spending have appeared in recent months,
when parliament employees were given a bonus worth 10 percent of
monthly salaries to compensate for radiation exposure from
antennas on large buildings.
The health ministry has also proposed a "stability" bonus
for staff in the sector. Local media have reported civil
servants in small towns across Romania demanding extra cash for
"loyalty" and "confidentiality".
Unions have urged the government to incorporate bonuses in
base salaries, making wage policy more transparent. They also
demand that wages be linked to productivity gains and inflation,
which reached a two-year peak of 8.6 percent in March.
"Such an adjustment mechanism would have reduced social
tensions to a large extent," Hossu said. "Pressure on the wage
fund would be a lot more bearable for employers."
Asked for comment on wage pressures, Romania's finance and
economy ministry reaffirmed its cap on wage growth this year.
Investors have complained about wage growth as well as
shortages in skilled labour, a problem across eastern Europe,
but foreign cash continues to flow into Romania, because of
relatively low labour costs.
Average net monthly wages in Romania, where an estimated
half of the workforce is unionised, stood at 1,134 lei ($481.5)
in February, up 20.5 percent on the year. Minimum wages in
Romania last year were the EU's second lowest, Eurostat data
showed.
(Additional reporting by Iulia Rosca; Editing by Stephen
Nisbet)
