BERLIN, May 6 (Reuters) - Germany's cabinet backed a change in law on Wednesday to ensure state pensions do not fall as a result of the financial crisis, government sources said.
The move came after the Handelsblatt business newspaper reported last month that state pensions, which are linked to developments in wages in the prior year, could decline by 2 percent in 2010 because of a drop in average wages this year.
The report prompted Labour Minister Olaf Scholz, a Social Democrat, to say he wanted to forbid future cuts in pensions. The government sources said the cabinet decision came after Scholz and Chancellor Angela Merkel reached a deal on the issue.
Merkel's ruling coalition, comprising her conservatives and the Social Democrats, faces a federal election in September and is keen to avoid alienating pensioners -- a big electoral group constituting around 20 million voters.
In return for the guarantee that pensions would not fall, the planned change in law allows for retirement payments to rise more slowly in future if average wages do indeed fall.
According to the plan, if wages were to fall this year, the rise in pensions would be halved in 2010.
This would continue until average real wage growth had recovered to the point where no cuts to pensions -- as prescribed by the government's mathematical model -- were necessary in theory.
The government did not, however, expect to have to apply the corrective plan, the sources said. (Reporting by Gernot Heller, writing by Paul Carrel, editing by Mike Peacock)