In her first keynote speech Wednesday to the DGB federation since she took power as head of a left-right coalition late last year, Merkel said a national minimum wage would not create jobs.

She proposed instead a system under which the state would top up the wages of low-paid workers aged under 25 or over 50 -- something the unions oppose.

Merkel also dismissed as "inappropriate" a minimum wage of 7.5 euros (9.5 dollars) an hour set by the DGB in a motion passed by its congress.

"If Merkel says she won't do 7.5 euros, well then we'll do 7.55 euros," DGB leader Michael Sommer said in response Thursday. Although Germany has no national minimum wage, there are agreements within various sectors between unions and management which fix basic levels.

However, the DGB estimates that some 2.5 million people are working for an hourly wage of between 3.5 and four euros.

Unions want the elimimation of low wages

Sommer had already said late Wednesday that Merkel's proposal to top up the pay of under-paid workers "won't improve anything" and what was needed was an across-the-board elimination of low wages.

Merkel was booed and whistled at the congress when she called for a reform in the way workers' representatives have a large say in how some big companies are run, notably in the key steel and chemicals industries.

Over the cacophony that met her speech, Merkel struggled to be heard. "I want strong unions. I want a strong DGB," Merkel said. "But the DGB, just like any other group, party or organisation, has to ask itself whether the answers of the past are still valid today."

Müntefering jeered for defending Merkel

The same treatment was afforded Germany's Vice Chancellor Franz Müntefering when he appeared in front of the labor unions in an attempt to defend Merkel and her government's controversial policies on pensions and wages.

Despite the links between the unions and Müntefering's Social Democrats, the vice chancellor, who is also the labor minister, was heckled while trying to explain the government's opposition to a minimum wage of 7.5 euros per hour and the decision to raise the retirement age to 67 from 65 in the coming years.