Minimum wage on way for Germany with Merkel set to agree compromise

Germany is set to introduce a national minimum wage, Chancellor Angela Merkel said yesterday, giving in to a core demand of the centre-left party with which she hopes to form a coalition government this year.

The concession was cheered by France, which has - along with the United States and the IMF - urged Europe's biggest economy to boost domestic demand and restore the lopsided trade balance of the export powerhouse.

"This is a signal ... of an approach that may be more co-operative within European economic policies," said French Finance Minister Pierre Moscovici, reiterating the need for a euro zone "rebalancing".

Merkel - who has argued that a minimum wage will hurt businesses and force them to lay off workers - said she would have to give in on the issue as a compromise in the ongoing coalition talks with the Social Democratic Party (SPD).

"The Social Democrats will not conclude negotiations without a universal legal minimum wage," she said in Berlin.

Merkel said she and her Christian Democratic Union (CDU) would "try everything to prevent the loss of jobs through this measure" and insisted that in return, her party would insist on its own "red line" demand of no tax rises.

She argued that fiscal discipline and balanced budgets help maintain investor confidence and global competitiveness and added that "Europe's problem is that we've promised almost everything so far and have kept very little of it". Merkel won September elections, but fell just short of a governing majority, forcing her CDU and its Bavarian partners the CSU to enter into tough coalition talks with the SPD, which both sides aim to conclude next week.