Unions Threaten to Oppose German Reforms

A day after Schröder and top union representatives failed after a three-hour meeting to reach an agreement on much-needed social system reforms in Germany, the country's organized labor on Wednesday warned it would begin rallying opposition to the government's broad plan.

On Tuesday evening, Schröder admitted his center-left government of Social Democrats and Greens and its traditional labor allies remained on a collision course.

"As was to be expected, we couldn’t resolve our differences today," he said, adding he would meet the unions again in May. "I hope I can convince them in future discussions."

Schröder last month announced a package of sweeping reforms in an attempt to revive flagging German economic 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.

Warning from unions

On Wednesday, the unions went on the offensive. "We will be able to organize a hot May," IG Metall deputy chairman Jürgen Peters told Inforadio Berlin, referring to traditional nationwide labor protests on May 1. Peters’ boss at the engineering trade union, Klaus Zwickel, has dubbed Schröder’s plans "the most painful social deconstruction in the history of Germany since 1945."

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.

For the moment at least, Schröder remains committed to his course. "There’s nothing I can or want to change," he stated firmly Tuesday evening. Whether he will be able to press ahead with his reform agenda is unclear, however, as some SPD members of parliament (MPs) may be loath to take on the unions, a traditional constituency of the party.

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. The government also faces a potential challenge from its grassroots junior coalition partner, the Green Party.

Greens parliamentary group co-leader Krista Sager said on Wednesday the Greens would hold a special party congress on June 14 to debate the labor and social security reforms. Though the Greens in parliament are generally considered more willing to back reform than the union-backed SPD members of parliament, they are also known for their independent streak on controversial issues. But the government can't afford to lose any votes because of its razor-thin major in the Bundestag.

Possible vote of confidence

That could cause Schröder to tie the reforms to a confidence vote, forcing the ruling coalition’s members of parliament to either back the reforms or risk toppling the government. 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.

Friedrich Merz, the economics spokesman of the opposition Christian Democrats, said the government could not count on the opposition to pass its legislation, saying the reforms don’t go far enough. He and others have also begun championing proposals to rein in the unions' power to set nationwide pay contracts -- a taboo for organized labor.

But business leaders on Wednesday urged the conservatives not to block the government’s proposals in Germany's upper legislative chamber, the Bundesrat, which is controlled by the Christian Democrats and their free-market liberal allies.

"The reform task is so big that they can only be solved by consensus," German Chamber of Industry and Commerce Association President Ludwig Georg Braun told the newspaper Handelsblatt.