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From the late fifties to the late eighties Germany was the EU success story. Then economic globalisation and the problems of the country's unification hit it hard. Currently mired in economic stagnation with persistently high unemployment, its socialist/green government has taken the first steps down a road which many of its supporters want to avoid.
GERMANY BUILT ITS ECONOMIC SUCCESS of the post-war period on the principles of educating and skilling its work force, demanding long-term investment from its financial sector while protecting it from foreign takeover and ensuring quality in all phases of the manufacturing sector that was the motor of the country's progress. All three of these pillars began to crack from the late eighties onward. Manufacturing became less important as, firstly, financial services and then internet e-business grew and many manufacturing jobs moved away from western Europe. It became harder to lock up financial investment in German companies as aggressive predators moved in from abroad e.g. in the Vodafone takeover of Mannesmann (see issue 10 page 4). The German education system began to look old-fashioned with its over-specialisation and shocked the nation by finishing 21st among 32 industrialised nations in an international study two years ago.
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Frank Bsirske, the president of the Unified Service Sector Union |
Chancellor Schröder : victorious for the moment |
Michael Sommer, president of the German Federation of Trade Unions | |
Added to these problems were those involved in trying to absorb an outdated, heavily industrialised East Germany, especially as its currency was given 1:1 parity with that of the West at unification. When Germany joined the EMU mechanism which led to the euro the country was exposed to even greater international competition and it found that it was the first member to break the euro-pact rules on public borrowing which its own bankers had been so determined to include. As unemployment grew consensus politics came under strain. Generous state provision in welfare, education and the arts was attacked from the right as the reason for high taxes and labour charges as were rules which forbade long shop opening hours and the starting of small businesses by craftspeople. Industrial unrest grew as employers resisted pay and hours demands that they would previously have negotiated on. On the election of a Green/Social Democrat government in 1998, the new Chancellor, Gerhard Schröder, instituted an 'Alliance for Jobs' to try to get employers and unions to co-operate to bring down unemployment. By the middle of this year however Germany still had nearly five million people unemployed and zero economic growth.
Schröder has now embarked on a different course to try and kick-start the economy . In his 'Agenda 2010', a title that echoes the Lisbon process of the EU, he seeks to relax labour market regulation by making it somewhat easier to dismiss workers, to hire temps and to choose who is made redundant. Unemployment benefit will stop after 12 months instead of 32, private provision of sick pay will now be allowed and red tape which prevents craftspeople forming small businesses will be reduced. Local authorities will be encouraged to invest more in construction by the release of low-interest loans to them, worth €15 billion. On training the Chancellor threatened the 70% of companies that do not train young people with a tax if they continued to 'shirk their responsibility to society'. He also charged trade unions and employers with making collective agreements more flexible through 'in-house alliances'.
Reactions to the proposals ranged from 'courageous' though not far enough from the employers and right-wing parties to outright opposition among trade unions, traditionally the strongest supporters of Schröder's party, the SPD. Michael Sommer, president of the German Federation of Trade Unions (DGB) called the planned reductions in benefits 'immoral' while Frank Bsirske, the president of the Unified Service Sector Union (Ver.di) accused the governing coalition of 'shifting wealth from the bottom to the top'. It remains to be seen if these measures, modest or not , will survive unscathed under pressure from forces on the government's own side but they represent a new departure down the road of benefit cuts and work flexibility so familiar to British trade unionists. The usual accompanying policy of tax cuts seems to be being considered currently with €5 billion likely to be put into German pockets next Spring. This will again break the euro public borrowing rules but in the increasingly desperate attempt to wake up the economy, possible retaliation from Brussels is a lesser worry.
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