Greek employers and labor unions yesterday agreed on cumulative pay rises of nearly 12 percent over two years, significantly above the projected inflation rate and probably in excess of the government’s liking. Private sector employees will receive 3.45 percent more retroactively from January 1, a further 3 percent from September 1 and a 5.5 percent rise on May 1, 2009. In its Stability and Growth Program, the government has projected an annual inflation rate of 2.9 percent for this year and next, but has since unofficially revised it to considerably above 3 percent, as the initial projection was based on the assumption of an average oil price of $55.5 per barrel. From May 2009, the minimum monthly salary will stand at 739 euros, up from the present 679 euros. Economy and Finance Minister Giorgos Alogoskoufis has repeatedly urged wage restraint to prevent the emergence of an inflationary spiral, fueled initially by the imported pressures from oil and commodity prices. Both sides expressed satisfaction with the pact. President of the General Confederation of Greek Labor (GSEE) Yiannis Panagopoulos said the agreement was «good,» especially in view of the fact that it had been reached in a socially charged climate. GSEE general secretary Costas Poupakis, also head of the conservative-affiliated grouping DAKE, said the agreement contained the «maximum feasible goals.» «The pact is the best of recent years, securing labor peace for the next two years. We are going through an especially critical period. The global credit crisis unfolding day by day is a harbinger of deeper and tougher changes,» said Hellenic Federation of Enterprises (SEV) president Dimitris Daskalopoulos. Sources said the government is also preparing to announce a 3.5 percent pay rise for public servants and incorporate part of the performance bonus in the basic salary. At an Inner Cabinet meeting yesterday, Alogoskoufis said the Greek economy had the means to deal with the consequences of the slowdown in the international economy and the impact on Greece would be limited. On the other hand, he said, inflation was a serious problem. «We have had an intensification of inflationary pressures since last summer, mainly in the prices of raw materials, foodstuffs and oil. The effects of this inflation cannot be dealt with in their entirety because the problem arises abroad. But it is important for imported inflation not to become more permanent in nature,» Alogoskoufis said.