Germany's main services union Ver.di has warned that thousands of its public sector workers could stage full-blown industrial action after talks with employers broke down.

The union is demanding a wage rise of at least 3 percent for Germany's 3 million public sector workers. Ver.di chief Frank Bsirske said that if no deal was reached at the next round of talks next week "we will move towards widespread action."

The union also wants to see pay levels harmonized between richer western and poorer eastern German states. Interior Minister Otto Schily said "strikes would be the worst possible response from the unions." Tens of thousands of workers across Germany have been staging short protests to put pressure on employers.