The Financial Times on Germany 1

The Financial Times on Germany November 2006

German union calls for end to pay curbs

By Bertrand Benoit in Berlin

Published: November 20 2006 22:04 | Last updated: November 20 2006 22:04

After a decade of stagnation, tough economic reforms, corporate restructuring and pay restraint, it is time for German workers to share in the rewards of the robust economic rebound, one of the country’s top trade unionists has said.

Frank Bsirske, head of the Verdi services union, delivered a blunt message to Angela Merkel days ahead of of her first anniversary as chancellor, warning there had been “a shift in the political conversation”.

There was now “a realisation that there is no majority in Germany for aggressive neo-liberal policies”, he told the Financial Times in an interview, adding: “Now we must see to it that this gets turned into action.”

His remarks underscore the sense that the Zeitgeist in Germany has changed since Agenda 2010, the unpopular social security and labour market reforms launched by the former chancellor, Gerhard Schröder, in 2003.

While Mr Schröder’s second term was defined by Churchillian calls for self-sacrifice, such notions as “social justice” and “fair wages” are regaining currency across the political spectrum.

Many in Ms Merkel’s Christian Democratic Union blame their poor electoral showing last year on her “blood-and-tears”, pro-reform campaign. The Social Democratic party, the CDU’s traditional rival and junior partner in the “grand coalition”, is also suffering from reform fatigue.

“And yet, when I look at what the grand coalition has done so far, I see continuity and even escalation,” says Mr Bsirske. When it comes to policies, he argues, Berlin serves pro-business ­interests.

He points to a draft corporate tax reform that would cut rates from 38.7 to under 30 per cent and contrasts it with next January’s rise in value-added tax, “which will hit jobseekers and ­pensioners”.

On the increase in retirement age from 65 to 67, he says: “Ask people whether they prefer to work two years longer or pay €14 more a month in pension contributions and they will pick the former.”

Mr Bsirske says his main fight will take place on the battlefield of labour market reform, an ideologically loaded policy area that is shaping up as the coalition’s biggest challenge next year.

Verdi is aggressively campaigning for a legal minimum wage. “The Federal Republic”, says Mr Bsirske, “is the only industrial nation where real wages have fallen in the past years.”

Competition from eastern Europe and laws that force jobseekers to take menial jobs, he says, mean hourly wages of €4 an hour are now commonplace in the service sector. A €7.50 minimum wage, he says, would pull 2.4m “working poor” out of their predicament.

Verdi’s clout is open to question. It was politically and financially weakened by a failed public-sector strike early this year. And, with its vast parliamentary majority, the grand coalition can afford to ignore interest groups.