Pay talks between Germany's public sector unions and the government have collapsed, bringing the prospect of a nation-wide strike in January closer.

Strikes earlier this week targeted airports and public transport, leading to the cancellation of hundreds of flights and long traffic jams. Kindergartens, hospitals and refuse collection services were also disrupted.

Frank Bsirske, chairman of public sector workers' union Verdi, said the pay deal offered by the employers was "totally unacceptable".

The union is demanding pay rises of more than 3% for its four million members.

Growing discontent

Unions, public sector employers and the federal government held 13 hours of talks on Wednesday.

Mr Bsirske said he would be recommending the union should reject the government's offer - no details of which have yet been given - when Verdi's pay panel meets on Thursday.

In addition to the 3% pay increase, trade unions want greater equality in pay between workers in the former communist eastern Germany and the richer west.

The strike comes amid growing discontent with Chancellor Gerhard Schroeder's handling of the economy.

Neither business leaders nor workers have welcomed his attempts to bolster a sagging economy with tax rises and public spending cuts.

EU budget strictures

The government wants a complete freeze on public sector wages. Interior Minister Otto Schily says meeting the 3% demand would cost 6bn euros (�3.8bn; $6.2bn), which the country can ill afford.

Germany is trying to rein in spending to keep its budget deficit within a 3% shortfall demanded by the European Union's Growth and Stability Pact.

Failure could lead to EU sanctions.

Public service sector workers have been carrying out sporadic stoppages since 5 December.

The collapse of the talks means an independent arbitration panel is likely to be set up to seek a settlement.