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Germany: Unemployment Figures Bring New Problems For Government

Germany's hopes for an economic recovery were shaken this week when unemployment figures climbed above 4 million people with little hope of improvement in the near future. Commentators see the figures as a blow to Chancellor Gerhard Schroeder, who is seeking re-election in September. A special commission is working on ways to find new jobs for the unemployed, including a reform of German labor laws.

Munich, 9 August 2002 (RFE/RL) -- Germany's hopes that its stagnant economy was moving toward recovery were shaken this week with figures showing that unemployment has climbed over the politically sensitive 4-million barrier and now amount to about 9.7 percent of the work force.

Chancellor Schroeder admitted that the figures are a major blow to his campaign to win re-election on 22 September. They also represent a personal defeat. When he took office four years ago, he declared that the success of his government should be judged on its ability to reduce the number of jobless.

At that time, unemployment was running only slightly higher than it is now -- 4.14 million. Schroeder vowed his government would bring it down to 3.5 million.

This week, the chancellor acknowledged he had failed to achieve this goal, and said there was only remote hope of an upswing in the last quarter of the year: "The numbers are not good -- that can't be denied. I think the job market will pick up in the last quarter of the year. There is a glimmer of hope -- but really nothing more."

Commentators believe the jobless figures will hurt the government in opinion polls ahead of the September elections. Polls published this week before the unemployment figures appeared show that support for Schroeder's Social Democrat government is already about seven percentage points behind the Christian Democrat opposition led by Edmund Stoiber, the premier of Bavaria.

Dieter Roth, who heads the Forschungsgruppe Wahlen electoral research group, said he expected the economy and unemployment to be the decisive factor for swing voters in the upcoming elections. Polls indicate that around 30 percent of the electorate remains undecided about which party to support.

"The economy will be the decisive factor," Roth said. "Voters will choose the party they believe is most competent to solve the economic problems. Every other issue will take second place."

Opposition leader Stoiber says the voters believe he and the CDU are more prepared to rescue the economy. He said the present coalition of Social Democrats and Green environmentalists has lost the trust of the people: "The Red-Green government offers no prospects for an upswing. The people's confidence in the ability of this Red-Green government to lead an upswing has sunk to zero."

Schroeder's government was also shaken by recent reports that some of the icons of the German economy, including the Siemens electrical concern, Commerzbank, and the Allianz insurance company are in trouble and may soon have to lay off thousands of employees.

Other reports indicate that 40,000 small and mid-sized companies across the country may close by the end of the year because of poor sales.

Not surprisingly, the situation has reopened the long-standing debate in Germany about modernizing Germany's labor regulations and reducing some of the side costs of employment. Politicians, labor experts, and media commentators all agree that reform is essential, but little so far has been done.

A commission led by Peter Hartz, the personnel chief for the Volkswagen car manufacturer, has been gathering ideas for four months and is expected to publish a formal proposal in August. Some of the commission's suggestions are already arousing protest. Labor leaders criticize some as too radical, while business leaders fear that proposals they support could be watered down by political pressure.

The Hartz plan attempts to confront the problem of those who do not look for work because they earn as much or even more from unemployment benefits. Political and business leaders -- including Chancellor Schroeder -- complain that many unemployed could find a job but don't wish to do so.

Hartz and his 15-member commission propose setting a time limit -- possibly one year -- for the payment of benefits. The commission believes that would force many workers to get a job once the payments stop. There would be safeguards for those who genuinely try to get a job but fail. Labor unions, however, are strongly opposed to the time-limit proposal.

The commission also proposes bringing forward large-scale investment projects in former communist East Germany, where unemployment is the highest. One such project is the building of a new Berlin airport.

It also proposes credits and other measures to encourage training programs for young people.

Most German commentators believe that any effective reform must include changes to Germany's long-established labor laws -- which means persuading the labor union to agree to changes in hard-won privileges.

One example is the strict job-protection rules which make it hard to fire inefficient workers. German employees also enjoy six-week annual holidays and a number of other one-day holidays which interrupt production in midweek. Health benefits, including rest cures in spas, are generous.

These help make the cost of labor in Germany among the highest in the world -- around $35 an hour when all benefits are taken into consideration.

Most German commentators doubt whether the labor unions are ready yet to accept radical changes in working conditions and benefits. The success of the Hartz commission's proposals, however, may depend on them.