Karstadt has been hit by slowing sales

KarstadtQuelle, which employs about 100,000 workers, said the job cuts will be implemented from 2005 to 2007.

As part of the deal, there will be no rise in staff pay.

Sell-offs

KarstadtQuelle - a household name in Germany - is likely to be pleased with the outcome of the meeting.

Earlier, it had said that it wanted to save 500m euros at its department stores and 250m euros at its mail-order arm, partly in order to maintain the support of its banks.

The Verdi union had earlier refused to agree to job losses, and according to reports both sides were at loggerheads unit until the end of the talks.

There was no immediate comment from the union following the firm's announcement, but shares in KarstadtQuelle, a household name in Germany, rose by 5.4%.

Shares have fallen about 45% over the past year.

The retailer - a merger of department store Karstadt and mail order company Quelle - has failed to stay ahead in Germany's competitive retail environment and has struggled to recover from earlier troubled mergers.

It has said that it wants to sell 77 smaller department stores and 300 speciality shops, as well as shedding real estate, logistics, catering, fitness and coffee-shop businesses.