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Croatia public sector unions reject government offer on wage hike

By Igor Ilic

ZAGREB (Reuters) - Public sector trade unions on Wednesday rejected a wage bill increase proposed by the Croatian government and invited the country's conservative prime minister to join the negotiations in person.

The government agreed in early 2009, at the beginning of the global financial crisis, that it would increase the wages of public sector workers 6 percent a year once the economy grew on average 2 percent in two consecutive quarters.

That condition was met last year but the government, led by the HDZ party which was also in power in 2009, now says the salary increases are unsustainable given the country's fragile budget.

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The government proposes a small compensation payment for 2016 before a two percent wage rise in January and an additional two percent increase next December, union leaders said.

"We do not accept the government's proposal. We invite Prime Minister Andrej Plenkovic to join the talks which are set to continue on Friday," Branimir Mihalinec, one of the union leaders, told a news conference.

The Unions want the full six percent increase in 2017 which they say could be done in phases and a solution for the raise they say they were due this year.

The annual cost of the salary increase promised in 2009 would be an estimated 1.5 to 2.0 billion kuna ($284.64 million), or some 0.5 percent of gross domestic product, according to the government and unions.

The government says it wants to resolve the deadlock but that any solution must not undermine its fiscal consolidation efforts.

Croatia is under pressure from Brussels to reduce its budget gap and tame the public debt. Public debt currently stands at about 85 percent of GDP.

For years Croatia has run a budget gap of more than three percent of GDP for years. The government targets a gap of 1.7 percent this year and 1.6 percent in 2017. It expects its 2017 budget proposal to be adopted on Thursday.

The unions have threatened legal action if no solution is found.

(Reporting by Igor Ilic; editing by Richard Lough)

 
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