Germany's government and opposition Wednesday night agreed on sweeping changes to the country's unemployment and social welfare systems. Municipalities will receive federal funds to help pay for the reform.
Long-term unemployed will have to accept just about any job
The new law, known as Hartz IV, will take effect on Jan. 1 after a mediation committee consisting of members of both houses of the German parliament agreed on a compromise.
The reforms affect about 1.6 million Germans who have been unemployed for more than a year as well as about 1 million people who are currently receiving social welfare payments because they cannot work.
Until now, long-term unemployed have received a larger sum of money and had to pay for their own housing. Now, single people will receive only about €345 ($420) per month while municipalities will take over paying rent.
The change is central to the government's labor market reforms, which are intended to reduce Germany's rampant unemployment. Currently, about 4.2 million people are unemployed in the country.
Under the new law, long-term unemployed will now have to accept almost any job they are offered and agree to move across the country if necessary or risk losing some or all of their financial aid from the state.
Billions for municipalities
"We're in deep water": Holding up town signs, many mayors all over Germany jumped into swimming pools last year to alert people to their cities' financial problems.
Government and opposition leaders finally hammered out a compromise Wednesday night after agreeing to increase transfer payments to municipalities to help them deal with the extra costs of paying for housing. While the government had originally offered €2.56 billion, local authorities will now receive €3.2 billion.
"The tug-of-war is over, now the work starts," German Labor Minister Wolfgang Clement said.
Opposition politicians including Roland Koch, the Christian Democratic premier from the central state of Hesse, said that the agreement was acceptable.
"It was better to reach a compromise than letting the bill fail," he said, adding that he also welcomed a pilot project that allows 69 counties and cities to take over the handling of long-term unemployed completely.
Koch said Christian Democrats were convinced that local governments could do a much better job than Germany's Federal Labor Office.
But critics of the change said that they expected chaos come January as neither the labor office nor municipalities would have enough time to prepare.
"This is going to become a catastrophe just like the toll disaster," Hermann-Josef Arentz, head of the Christian Democrats' social welfare committee, told Bavarian public broadcaster BR , referring to Germany's planned truck toll system, which was supposed to go into operation almost a year ago .
Both houses of parliament are expected to finally approve the compromise legislation next week.