- The Washington Times - Sunday, February 15, 2004

BERLIN (AP) — Germany is reviving its cozy partnership of labor and big business after two years of strikes, but the buildup to an industry pay deal last week shows unions — long accustomed to helping run the country — increasingly on the defensive against employers as well as the government.

With its promise of regular pay raises and fat benefits for workers in return for long periods of labor peace, the German system is not about to fold. Yet analysts say that by clinging to past comforts, the unions may be setting themselves up for an erosion of power down the road.

IG Metall, the giant manufacturing union with 2.56 million members, could count on little public support for a fight this year after a disastrous strike in economically depressed eastern Germany last year. Its pay settlement with employers Thursday allowed some room for longer working hours, but put off further reforms for at least three years.

Even Germany’s civil servants, accustomed to privileges rooted in the 19th century that include lifetime job security, are under pressure. The government last month raised the once unthinkable recommendation that they work longer hours and accept performance-related pay.

In industry, increasing low-cost competition from Eastern Europe and elsewhere is certain to keep the cherished German consensus model under strain, said Herbert Buscher, a labor market researcher at the Halle Institute for Economic Research.

“The unions have to become more modern,” he said. “They cannot maintain that Germany is a blissful island bypassed by globalization. They have to recognize that conditions have changed, that people can go to Poland or the Czech Republic.”

The realization already has been setting in as IG Metall — sometimes described as the world’s largest industrial union — increasingly gives its blessing to individual pay deals between companies and employees, outside the one-size-fits-all contracts that try to set equal pay conditions regardless of a particular company’s economic situation.

That helps explain why IG Metall had little stomach for a fight this year, especially after it misread the public mood last year with its failed strike for short working hours in eastern Germany.

With unemployment running above 10 percent and the economy in its third straight year of stagnation, that strike was hugely unpopular. Over the past decade, the union has lost a half-million members in Germany’s mainstay auto, electrical and engineering industries.

“The problems that were there haven’t been solved,” said Gebhard Flaig, an economist at the Ifo Institute in Munich. “They have bought calm in the short term, but this decision hasn’t ended the union’s crisis.”

Sensing weakness, employers this year pressed for looser union control on the shop floor, which they said would give the rigidly regulated German economy the flexibility it needs to compete in a global economy.

“In a way, this pay round is really a last chance,” the daily Sueddeutsche Zeitung said. “The ongoing jobs crisis shows that we can’t go on without structural change to the wage system in Germany.”

In the deal, IG Metall agreed to let more industrial companies ask their workers to work up to 40 hours a week.

It was a tough step for a union whose proudest achievements include limiting the workweek to 35 hours in western Germany, which accounts for most of the country’s economic power. However, the concession applies only to white-collar workers and requires union approval in each case.

Cracks in support for nationwide pay deals emerged Friday as employers in the formerly communist eastern Germany expressed reluctance to apply the pay accord, thrashed out in the prosperous industrial heartland of Baden-Wuerttemberg, which traditionally sets the pattern for the rest of the nation.

“As so often, no account was taken of our special economic circumstances, particularly those of small and midsize firms,” said Bodo Finger, an employer leader in Saxony.

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