Berlin  - Germany's core industrial employers agreed Wednesday to a limited programme of labour buyouts for elderly workers, ending a point of friction before pay talks begin next month with the powerful IG Metall trade union.

The union had idled major car and electrical factories this year in pursuit of the "right" to early retirement, which runs counter to the German government policy of gradually raising the nation's retirement age from 65 to 67.

Berlin has just wound up a state-subsidized early-retirement scheme, arguing that increasing life expectancy and a sagging birth rate in Germany are sending the pension system into a crisis.

Wednesday's accord near Stuttgart between the Gesamtmetall employers' federation and IG Metall requires employers to extend labour buyouts on request to up to 2.5 per cent of their workforces, or up to 4 per cent in companies where night work is usual.

The accord initially applies only to Baden-Wuerttemberg state but is expected to be applied nationwide to 3.4 million workers. It will be funded by employers and by a slowdown in pay rises.

Employees aged 61 or over will be able to halve their working hours till retirement age. Their pay will only fall 11 to 15 per cent. (dpa)