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Business

German Labour Dispute Looms Large

A powerful labour union is playing tough, demanding a big wage increase and threatening pre-election strikes, though employers and the government may be unable to afford it.

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Klaus Zwickel, mastermind of a bold new wage demand

IG Metall, the German metalworkers union, on Monday called for a 5-7 percent wage increase in 2002.

The demand goes well beyond what employers say they are willing to give and the sort of wages economists say will be possible, at a time when Germany’s economy is sputtering.

In November, economic results showed that Germany’s economy, the world’s third-largest, has begun to contract following a trend in the United States and Japan, the two biggest.

The government can now add potential labour unrest to its growing list of economic concertns.

Klaus Zwickel, IG Metall’s chief, warned that “first warning strikes” could be staged “by Easter.”

Schröder has reacted cautiously by calling for “overall economic good sense,” but his government, along with employers, appears on course for an ideological conflict over labour rights and distribution of wealth.

Tough tactics

Zwickel says the wage increase would help workers “catch up” on their fair share of profit following several years of growth.

It is the sort of bold claim that can draw other unions into a co-ordinated struggle. Germany’s largest union, Verdi, which represents some 3 million service-sector workers, has vowed to push for a “sharp increase” in 2002, too.

But IG Metall’s position is highly disputable. Wage increases negotiated by the union have outpaced consumer price increases three years running, and on average wage growth has well outpaced both consumer prices and gross domestic product.

So the claim that workers have been somehow left behind, in this case, lacks punch.

The demand may be mostly tactical. IG Metall has shown before that it is willing to aim high with wage demands and then settle for something lower.

A Deutsche Bank economist predicted that an increase of 2.0-2.75 percent may satisfy IG Metall.

Nonetheless, it has outraged the industry’s employers association, Gesamtmetall, and worried policymakers.

“It (the demand) ignores reality and sends false signals for employment and the labour market,” said Gesamtmetall president Martin Kannegiesser.

Political dynamite

Those signals, if strong enough, could be politically devastating to a centre-left government that swept to power in 1998 much to the glee of organised labour.

With parliamentary elections set for next September, strikes would be a major blow to Schröder, whose government of Social Democrats and Greens already faces heavy criticism for its economic policy.

The government has failed to fulfill its campaign promise of dramatically lowering unemployment. New job cuts this year have sent unemployment rising again above 9 percent, and economists warn that Germany’s jobless population could reach 4 million this winter.

Schröder could be in for a bitter spring, unless Gesamtmetall and IG Metall reach a compromise between January 28, the day the union plans to approve its wage demand with its regional organisations, and the Easter holiday.

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