FRANKFURT  Hundreds of thousands of bank employees in Europe's largest economy are fighting for pay increases of up to 16% to cope with rising living costs and unions are warning of possible strikes.

Pay negotiations for Germany's public and private bank employees follow a spike in costs that has hit ordinary workers hard, while the banks have benefited from the higher interest rates imposed to combat inflation.

Talks are already underway that will affect more than 140,000 employees at banks such as Deutsche Bank and Commerzbank 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.

Separate talks begin on Friday in Duesseldorf for the country's public banks - which include Landesbanks, an array of savings banks, and the state development bank KfW.

VOEB, the organisation that negotiates for the public banks' management, said Verdi's 12.5% demand was unrealistic.

"Anyone who achieves results in the billions must also keep an eye on those who make these results possible," said Frederik Werning, a Verdi official.

In May, unions and Deutsche Bank's management reached a deal for thousands of the lender's Postbank employees, putting an end to months of wrangling and strikes. Employees won a 11.5% increase in two steps.

  - Reuters