Unions Criticize Schröder's Reform Plans

“It’s going in the wrong direction,” Klaus Wiesehügel, head of mining union IG BAU, told ZDF television, referring to German Chancellor Schröder’s proposed cuts in unemployment benefits and loosening of job protection.

Schröder last month announced a package of sweeping reforms in an attempt to revive flagging German growth and shore up the country’s creaky social security system, but his “Agenda 2010” plan has encountered massive criticism from unions and the left-wing faction of his own Social Democratic party (SPD). At the heart of the reforms are proposals to cap unemployment benefits at 12 months and make it easier for small firms to hire and fire new workers.

“The social cuts in their current form would plunge vast numbers of the unemployed into a financial emergency,” said Ursula Engelen-Kefer, the deputy leader of the German Trade Union Federation. She called for nationwide union protests against the reforms.

Economy stalls

But Schröder has staked his political survival on pushing through the unpopular measures, after scraping to victory in last September’s general election. In recent years, Europe’s largest economy has ground to a halt under the weight of its generous welfare system and constricting labor market policies. Economic growth slowed to only 0.2 percent in 2002, its lowest annual rate since a recession in 1993, and German unemployment is running at a five-year high of 11 percent.

“I expect Agenda 2010 to be implemented point for point,” Schröder said at a press conference on Monday. He said he was willing to discuss details with the union leaders, but not the overall course of his polices.

Whether Schröder will be able to press ahead with his reform agenda remains to be seen, however, as some Social Democratic MPs may be loath to take on the unions, a traditional constituency of the party.

Reforms to timid for opposition

Many of the chancellor’s own backbenchers argue relaxing job protection rules won’t create new jobs and are instead calling on the government to spend more on public works projects to spur the economy.

But business leaders and the conservative opposition say Schröder’s reforms don’t go far enough and have begun championing proposals to rein in the unions' power to set nationwide pay contracts -- a taboo for organized labor.

Friedrich Merz, the economics spokesman of the opposition Christian Democrats, said the government could not count on the opposition to pass its legislation, even if it agreed with the general direction of the reforms. “He’ll have to get his own majority in parliament and then we’ll decide whether we vote for it or not,” Merz told Reuters.

The final shape of the proposals are to be hammered out by the end of April and the chancellor has said he will push to have the reforms made into law before the parliament’s break this summer. Tuesday’s meeting was seen as an attempt to get organized labor on board, but in light of the withering attack from union leaders, the government was already playing down expectations.

“There is understanding that there can’t be agreement on all issues,” said SPD General Secretary Olaf Scholz. But he said the unions could be certain that the proposals would be socially balanced.