[A-List] Germany: fiscal crisis & labour militancy

["Michael Keaney" <michael.keaney@xxxxxx>]

Strike threat piles on pain for Schröder
By Hugh Williamson in Berlin
Financial Times; Nov 16, 2002

Germany's largest trade union yesterday warned of strike action over public
sector wages, adding to mounting problems for Chancellor Gerhard Schröder
over the stagnant economy and dire public finances.

As the service industry trade union Verdi warned of public-sector walkouts
unless the government and local authorities met its demand for a wage rise
of at least 3 per cent, Pedro Solbes, European Union economic affairs
commissioner, identified Germany as the EU's key economic concern.

The public mood has also swung against Mr Schröder, with a poll yesterday
indicating the lowest support for the government in four years.

Mr Solbes said in an interview that Germany "must take on market reforms to
increase its growth potential". He added: "In the eurozone there is a
well-identified problem: Germany."

The latest difficulties come at the end of a disastrous week for the German
government following a reprimand for Berlin from the European Commission
over its budget deficit and new figures indicating tax shortfalls this year
and next of ?31bn (£19.5bn).

Government officials played down the current problems, and pointed to a
package of labour market reforms adopted yesterday in parliament as a signal
that economic reforms were under way.

Frank Bsirske, Verdi chairman, speaking ahead of yesterday's opening round
of talks on a new public sector wage agreement, said the employers had "set
off on a collision course" by arguing that a pay freeze was the only deal
possible.

He compared Verdi's position with that of the engineering union IG Metall,
which settled in May on a 4 per cent pay rise after a 10-day strike.

Otto Schily, interior minister and chief government negotiator, said the
current financial crisis meant the federal, state and local governments
could not afford wage increases. Pay rises would mean jobs would be
eliminated, he warned.

The wage negotiations, covering 2.9m nurses, firefighters, local government
employees and others, are likely to be the toughest for years, despite the
government's close ties to the labour movement on other issues.

Underlining the government's budgetary problems, parliament yesterday
adopted a ?3bn emergency package of health cuts, and increased pension
contributions to counter falling revenues.

Mr Schröder is due to meet coalition leaders tomorrow to discuss further
savings. Many of Germany's regional states have also announced emergency
measures to cover budget shortfalls.

In contrast, Verdi argues that public sector pay has lagged behind private
sector settlements for a decade, and is determined to reach an agreement in
line with average private sector deals this year of 3-4 per cent.

The union also wants to stamp its authority on public sector wage
bargaining, following its formation last year through the merger of five
separate unions.

The employers yesterday refused to table a pay offer.

* The German parliament yesterday voted to extend by one year the deployment
of German troops to the Enduring Freedom anti-terror alliance. The initial
deployment, agreed last November, almost led to the collapse of Mr
Schröder's government.