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By Wolfgang Mulke
BERLIN, June 28 (Reuters) - German engineering union IG Metall and employers on Saturday broke off talks aimed at ending a strike in eastern Germany that has hurt the country's key car industry.
Negotiations between engineering union IG Metall and employers had re-started on Friday and went on overnight amid hopes a deal could be reached to end a strike over shorter working hours that has lasted for almost four weeks.
"The talks have failed," a spokesman for Gesamtmetall employer federation said after 16-hour long negotiations.
IG Metall left open whether the strikes would continue and said the union would discuss its further strategy on the weekend. It blamed the talks' failure on the employers.
"We think the employers have missed a big chance," IG Metall chief negotiator Hasso Duevel said.
Workers at car and steel plants in the still depressed former communist east have been on strike since early June, demanding a reduction in the working week by three hours to 35 hours, the standard for their western colleagues.
Employers said the union had lacked willingness to compromise. "We have set a positive signal," said Roland Fischer, negotiator for the employers.
The stoppages have hurt Germany's car industry, which accounts for 10 percent of total industrial output and hundreds of thousands of jobs.
TALKING POINTS
Volkswagen AG said on Friday it had stopped production of its top-selling Golf model at its main Wolfsburg plant in western Germany for lack of parts from the east.
The strike has idled BMW AG plants in western Germany this week as parts from strike-hit eastern factories were not delivered, prompting fears the action could dampen already fragile growth in the entire German economy.
BMW has said the strike might make it reconsider the scale of an investment in the eastern city of Leipzig, where it is building a new factory which would create 5,500 jobs.
IG Metall is demanding a gradual cut in hours, which it says is justified by advances in eastern productivity.
The union said they had presented a compromise deal to employers, offering a range of weekly working hours between 35 and 40 hours to take account of companies' different situations on the path to the introduction of the 35-hour week.
The employers also offered a band between 35 and 40 hours, and had offered to reduce the working time by one hour until April 2005. They also wanted to allow new investors to pay two percent less in wages for a limited amount of time.
Employers say the 38-hour week for the 310,000 engineering employees in the east is justified because of lower productivity than in the west. But eastern workers say they feel like second-class citizens 13 years after unification.
Economists warn that the former east, where the rate of unemployment at about 19 percent is more than double that in the west, risks driving investors further east to neighbouring Poland or the Czech Republic if it pushes up labour costs.
The trade unions are traditionally close allies of the ruling Social Democrats but relations have soured of late as Chancellor Gerhard Schroeder has proposed reforms to welfare benefits and labour laws, which the unions say will hurt workers' interests.