Schröder Defends German Worker Input

Speaking at an employers' conference in Berlin, Chancellor Schröder warned company bosses from attacking Germany's nearly 30-year-old system of mitbestimmung, which roughly means worker "co-determination." He said that particularly at a time when Europe's largest economy is struggling with difficult economic reforms, workers should have a voice.

"I believe that one should allow those that are affected by the reform process that we are currently in to take part in it," Schröder said. "We are experiencing trying times marked by demographic challenges and economic globalization which is worrying people. My plea for co-determination rests upon that realization."

Opposition to co-determination has been growing recently among employers' groups who say it hurts the competitiveness of German firms and makes the country less attractive to investors. The law entitles workers to up to 50 percent of the seats on company supervisory boards. The rules include all firms with more than five workers in Germany.

Although employers have been pleased Schröder has not veered from his "Agenda 2010," a package of labor market reforms and welfare cuts, they have expressed concern that the chancellor's center-left coalition may not push ahead with further necessary reforms. Plagued by chronic unemployment and meager growth, Germany has struggled to revamp its economy in recent years.

Hurting competitiveness?

The German Industry Association (BDI) and the German Employers Association (BDA) say limiting worker representation could aid businesses in making harsh but vital decisions during these difficult times. "We want to keep co-determination. The question is how can we make the system tenable internationally so we aren't completely isolated," said Reinhard Göhner from the BDA.

But representatives from trade unions believe company bosses are simply trying to use the current situation to roll back workers' rights.

"It's a classic political power play to roll things back -- that's what's going on here," said Michael Sommer, the head of the German Trade Union Association (DGB). "As unions we have to defend co-determination as intelligently as we can."

Unionists are likely to be relieved by Schröder's show of support for worker determination. However, unless some changes to the system are made, Germany's co-determination could eventually run afoul of European Union judicial rulings aiming to tear down barriers to EU-wide competition.

Resistance to reform could also weaken Germany as a location for holding companies of multi-national corporations, as firms decide to set up their headquarters elsewhere to avoid the co-determination laws. For example, when German pharmaceuticals giant Hoechst merged in 2000 with France's Rhone-Poulenc to create Aventis, the new company opted to be based just over the French border in Strasbourg.