FRANKFURT, June 19 (Reuters) – Hundreds of thousands of bank employees across Germany are demanding significant pay increases of up to 16% to keep pace with soaring living costs.

The pay negotiations come at a time when the country faces a sharp rise in expenses, placing substantial financial pressure on ordinary workers, while banks enjoy the benefits of higher interest rates implemented to curb inflation.

Union leaders have indicated that the rising cost of living has significantly impacted the purchasing power of bank employees, prompting their call for substantial wage hikes.

“The current economic situation demands that we take strong action to ensure our members can maintain their standard of living,” said a spokesperson from one of the leading unions representing bank employees. “We are prepared to take further steps, including strikes, if necessary.”

The unions argue that while employees struggle to meet their daily expenses, banks have reported increased profits due to the higher interest rates set by the European Central Bank (ECB) as part of its strategy to control inflation. This disparity has fueled the demand for wage adjustments.

Talks are already underway that will affect more than 140,000 employees at banks such as Deutsche Bank (DBKGn.DE), opens new tab and Commerzbank (CBKG.DE), which opens new tab but they have run into trouble.

Separate discussions for more than 60,000 staff at state-affiliated banks kick off on Friday.

Unions are demanding pay increases of between 12.5% and 16%, and are highlighting big profits made by banks. Both labour and management are already digging in their heels.

At talks earlier this week, union negotiators rejected an offer from private bank employers for an 8.5% pay increase.

Jan Duscheck, chief negotiator for the Verdi labour union which is pushing for a 12.5% increase, told Reuters the 8.5% offer was “way off the mark” and said that strikes were likely before talks resume in July.

Some Commerzbank employees already went on strike last week demanding higher wages.

Inflation rates in Germany have come down significantly from nearly 7% in 2022 – the highest pace in decades – but the 2.4% rate for May is still higher than many Germans are used to.

Another union, DBV, is seeking a 16% increase and said in a flyer for members that it was giving the employers’ offer of 8.5% the “yellow card”.

AGV, the association representing employers, described its offer as “a first step” that showed it was willing to make considerable pay increases. But it also highlighted weakness in the economy, lower interest rates and geopolitical risks.