From a macroeconomics standpoint there are four main categories of indexation: wage indexation, financial instruments rate indexation, tax rate indexation, and exchange rate indexation.

The Presidents' pact also ordered the introduction of full wage indexation to offset the effect of the price rises, rather than the existing system of compensation payments.

Poland must cut spending, free prices, tighten tax discipline, cut state subsidies and wage indexation and limit pay increases.

But drawbacks remain, he said: a kind of wage indexation, limits on overtime, and restrictions on layoffs.

There was broad agreement that there would be some sort of wage indexation, although workers are unlikely to be compensated fully for price rises.

The official trade unions, thought to be linked to conservatives in the communist party, were holding out for 100% wage indexation.

In an attack on inflation heading for 1,000 per cent by year-end, he government proposes to limit automatic wage indexation.

Mainly, though, it has been the effect of a decision made last year to abolish Italy's wage indexation, a costly link between wages and consumer prices that desperate politicians convinced the labor unions to surrender.

The six objectives are: abolishing wage indexation, raising pension ages, creating a common base for corporate tax and adopting debt brakes.

By law, all covered workers who attain age 62 in 2006 must be treated the same with respect to wage indexation so the 2004 figure for national average wage must be used for the entire 2006 year.