Berlin to Push Reforms Despite Labor Office Turmoil

Though many in his party stood by him until the end, employer groups and unions succeeded in deposing Florian Gerster, the controversial head of Germany's Federal Labor Office, over the weekend.

After the board’s vote on Saturday, Labor Minister Wolfgang Clement fired Gerster. "I regret the development that has occurred," he said. Clement said the government would not only continue with the former chief’s reform course but also dramatically expand it by eliminating almost two-thirds of the Nuremberg-based agency’s 1,100 jobs and shifting the funds to the local level so that more jobs can be found for the unemployed more quickly.

The government plans to decentralize the labor office and create a modern, customer-oriented services agency that is aimed at success and will be tested on its results, Clement said. "Everything is going to go toward placement at the local level," he said, adding that local personnel agencies would work closely with communities in order to achieve success in placing unemployed workers.

Gerster was ousted in a hostile, 20-1 "no confidence" board vote on Saturday. Just shy of having completed two years on the job, Gerster became either the subject of one too many negative headlines or the victim of a concerted campaign by employers and unions to oust him over unpopular reforms, depending on whose take you listen to.

Two hard years on the job

In March 2002, the board replaced former chief Bernhard Jagoda after auditors concluded the office had regularly inflated claims of helping Germans find work. Gerster quickly undertook painful reforms to the agency aimed at transforming it from a moribund bureaucracy to a decentralized and dynamic job-placement agency. But often during the past year, scandals and mini-eruptions plagued Gersters’ leadership.

Late last year, Gerster hit the news when media and opposition politicians criticized him for approving €2.6 million ($3.3 million) for refurbishing agency managers’ offices. In November, he denied any wrongdoing in awarding a public relations firm a €1.3 million contract without first holding a public tender. He explained the move by saying the services were urgently needed to get out the message about planned labor office reforms.

And this month, Gerster’s office was accused of awarding three illegal contracts, including a €1.66 million contract with IBM and additional work for Munich-based business consultant Roland Berger, who was a member of the government commission charged with drafting the labor office’s reorganization. (Editorial disclosure: Deutsche Welle TV is currently airing a documentary series produced in cooperation with Roland Berger.)

But Gerster has consistently defended his actions – and he did so again on Sunday night in an interview with Germany’s ARD public television station, where he said he had been the "victim" of a concerted attack by his enemies. Gerster accused the board members of coming to the meeting with "preconceived opinions" that resulted in his dismissal. Just one month ago, he pointed out, the board still stood behind him; but since then there has been no change in the situation.

Gerster said he did not believe that allegations his agency had acted illegally in awarding expensive consulting contracts had played any roll in his firing. "The results were firm before the audit report could even be discussed," he said. Instead, he alleged, he was dismissed over his management style. "I’m fighting with the image that people have created who either don’t know me at all or were working in their own interests," Gerster said. "It was my experience that many members of the advisory board yielded under group pressure."

Drawing lines in the sand

Over the weekend. Gerster’s friends and foes quickly drew lines in the sand before taking shots at each other.

The deputy chairman of the Free Democratic Party (FDP), Germany’s neo-liberal opposition party, took advisory board chairwoman and German Trade Union Federation deputy head Ursula Engelen-Kefer to task for her role in Gerster’s dismissal. "Cartel sister Engelen-Kefer, together with her cartel brothers from the employers associations (on the board) were victorious," he told the Berliner Zeitung newspaper.

But Brüderle said he believed Gerster fell into the firing line because of deep cuts he made to retraining and extended education programs that both unions and employer organizations had profited from in the past. With Gerster now out of the picture, he said, "the cartel has won."

Engelen-Kefer defended herself against the accusations. She said Gerster had "in now way" been deliberately removed from his position by the unions. In an interview with the German public radio station Deutschlandfunk, the chairwoman also rejected criticism of the advisory board, With their contributions to unemployment insurance, Engelen-Kefer said, employees and employers paid the lion’s share and, therefore, it was "only correct" that they have a say on the advisory board.

VW personnel chief a possible successor

The Labor Office’s board now has four weeks to find Gerster’s successor. Not one to waist time, Clement has already named his desired candidate: Volkswagon Personnel Department chief Peter Hartz – the man who headed the commission responsible for drafting a report guiding the reform of Germany’s labor market last year. The Frankfurter Allgemeine Zeitung on Monday quoted sources close to Hartz saying that the VW executive would be prepared to take command of the Labor Office if asked, but a Volkswagon spokesman dismissed the report as "pure speculation." Hartz "is and will remain personnel chairman at Volkswagen," the spokesman said.

But Hartz isn’t the only name circulating. Press reports have also named Deutsche Telekom personnel chief Heinz Klinkhammer, Gerster deputy Frank-Jürgen Weise, and deputy economics minister Alfred Tacke as possible successors.

Until Gerster’s replacement is named, Weise will assume the reigns of the beleaguered agency, which oversees benefits and job placement for Germany’s more than four million jobless.