Germany's labor costs rank seventh highest in Europe behind Denmark, Sweden, Belgium, Luxembourg, France and the Netherlands, according to 2007 figures released by Germany's Federal Statistical Office on Tuesday.

Average labor costs per hour worked in Germany stood at €29.10 ($46.5), significantly less than in Denmark and Sweden with €35 and €33.40 respectively. Not surprisingly, Eastern European countries are far down the table, with Bulgaria at the bottom with €2.10 per hour.

However, Germany's labor costs are higher in the manufacturing sector at €33 per hour, the fourth highest in the European Union.

Even though differences in labor costs across the EU remain high, the gap is gradually narrowing, the statistics office said. "In member states with a level of more than €20, the labor costs in the private sector increased by less than five percent. Where the level was less than €10, growth amounted to between 10 and 30 percent," the office said.

In Germany, labor costs grew just one percent last year, the smallest increase of all EU countries. That's good news, says Christoph Schröder, labor cost expert at the German Business Institute (IW). "We're still high up in the ranking in industry, so it was very necessary for us have only a moderate increase in costs," he said.

Recent growth in industrial employment in Germany was partly due to weak labor cost growth, he added.