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Buying Power in a Time of Recession

Unions fight for wage increases and industry leaders talk of endangered jobs as recession looms in Germany


Is the sun setting on the German economy?

As German companies and economic policy makers struggle with the prospect of a looming recession, the head of one of the country’s major trade unions warned against plans to reduce or withhold wages.

"The economy needs buying power," said Dieter Schulte, the head of Germany’s Trade Union Federation.

Schulte’s comments came on the heels of an announcement by the Federal Statistics Office that economic growth had slipped 0.1 percent in the third quarter. The slip meant the German economy grew only 0.3 percent compared to the same time last year, the lowest climb since 1997. The office announced it didn’t expect much improvement in the final three months of 2001.

The country’s major unions and economic institutes have been urging the government to speed up the introduction of tax cuts to stave off recession and increase spending on infrastructure to encourage investment and create jobs. Germany’s major unions said that they had given employers more than enough room to do both.

"Employers haven’t been taking advantage of these opportunities," Schulte said.

No Wage Increase Any Time Soon

The head of Germany’s Confederation of German Employers' Associations warned the unions that they couldn’t expect wages, which have grown only moderately, to increase anytime soon. Increasing wages, "increases the crisis and endangers jobs," said Dieter Hundt, whose organization represents the interests of German employers across the board.

The two sides are still struggling to agree on a meeting date to discuss these issues before the end of the year.

Chancellor Gerhard Schröder has urged unions to request only moderate wage increases. At the end of his party’s congress in Nuremberg, Schröder weighed in again, asking that industry leaders be prepared to compromise as well. Both sides come to an agreement that "leads to the creation of jobs, not the opposite."

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