International

Germany braces for massive strike

By Batuk Gathani

BRUSSELS MAY 6. More than 50,000 workers at 21 top German companies are expected to begin striking today as crucial wage negotiations between Germany's largest industrial union, IG Metall, and employers have broken down. Union officials have requested a strike call for today, leading to much speculation about the potential "bleeding effect" on the ailing German economy.

In the largest labour unrest in Germany in seven years, IG Metall is poised to follow through on consistent threats for national strikes if no agreement is reached today. More meetings are scheduled around-the-clock until tomorrow.

IG Metall, with a membership of 28 lakhs, has consistently argued for a 6.5 per cent rise in wages. Employers have agreed to only a four per cent rise, which they say would still eliminate 130,000 jobs. The union has argued that higher wages would boost consumption, which may raise profits and create more jobs — an argument that may hold little water among nervous German companies, depressed by the weak state of the economy. Economic growth rates have been sluggish for years and although business confidence has picked up in recent weeks, the prospect of a national strike has sent cold shivers through German companies.

With national elections scheduled for September 22, a strike could be devastating for the Chancellor, Gerhard Schroeder's centre-left Government. German unemployment remains above the critical four million mark, despite his election promise four years ago to bring down unemployment to around 3.5 million. Mr. Schroeder has not been able to move on labour reforms because of his political reliance on trade union support; and so far, the unions have not moved to initiate any reforms. German political support is now moving towards the centre-right, where Christian Democrats, led by Edmund Stoiber, are busy exploiting Mr. Schroeder's embarrassment, whose popularity is now at its lowest ebb.Germany is still the E.U.'s locomotive economy and the world's third largest, which leads many to worry of a significant spillover potential for Germany's major trading partners. Although Mr. Schroeder has consistently argued for "daring and imaginative" economic and labour reforms, many observers are still wondering if German authorities are following a viable strategy to attract investments, create more jobs and ease high unemployment.

The German labour market remains notoriously inflexible and in recent months, labour costs have soared at an alarming rate. Many Germans feel that the Government should make it easier for companies to hire and fire workers, while employers are reluctant to take on more staff under the current protective labour policies.

Authorities have said that the proposed 6.5 per cent wage rise would drastically push up inflation and trigger an unwelcome rise in interest rates by the European Central Bank, particularly depending upon how long the strike lasts.

According to economic observers, if the strikes do not last more than two weeks, German companies can absorb the impact with minor financial consequences. Most analysts are convinced, however, that a national strike — long or short term — could threaten production.

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