Time - Man of the Year/Time_Man_of_the_Year_Compact_Publishing_3YX-Disc-1_Compact_Publishing_1993.iso/moy/051892/0518020.000

Text File | 1992-09-10 | 9KB | 173 lines

                                                                                GERMANY, Page 50

End of the Miracle


Why the citizens of Europe's most successful nation are
increasingly unhappy with their lot: unification has proved a
heavy burden, and workers are taking it out on the faltering
government of Helmut Kohl.

By JAMES O. JACKSON/BONN


    Mounds of garbage in the streets, stacks of undelivered
mail, trains that did not run on time. This is Germany?

    Yes, indeed. For 11 days, Germans got an unaccustomed
taste of civic disorder, when garbage collectors, transport
workers and other public employees walked off their jobs in the
longest and most acrimonious strike since the end of World War
II. Streets stank, planes didn't fly, traffic snarled. In the
end the workers prevailed, forcing the government of Chancellor
Helmut Kohl to surrender to a 5.4% pay raise. It was less than
the unions wanted but more than Kohl felt Germany could afford.

    He may be right. The decision to boost wages above the
current inflation rate of 4.5% is almost certain to set off a
new inflationary spiral, raise the federal deficit and slow the
flagging economy. Even so, most Germans backed the strike
because they were angry -- embittered by the swelling cost of
unification, furious over rising taxes and indignant at being
asked to bear too big a share of aid to the former communist
countries in the East. And the anger will not soon subside.
Other unions, in the metal, printing and construction trades,
will ride the wave of discontent to demand similar increases to
offset tax hikes linked to German unification. They probably
will win pay raises too, despite the strenuous objections of
industrial leaders who predict falling exports and vanishing
jobs as a result.

    It all marks the end of the most enduring business-labor
armistice in Europe, a social contract that allowed Germany to
achieve its postwar miracle of industrial prosperity. Perhaps
that compact of mutual benefit can be restored eventually.
Nevertheless, the size of the wage hikes resulting from the
strike will damp the energy of Europe's economic powerhouse at
the critical moment when it is needed to pull the Continent
together. Germany, the "Paymaster of Maastricht," whose
Bundesbank anchors the European monetary system that will be
unified under that treaty's ambitious integration plans, is
certainly headed for deep debt, maybe even into recession.

    The winners of the strike -- if it can be said to have
winners -- were the 2.3 million members of the Public Services
and Transport Workers' union, one of 16 giant labor combines
that encompass most of western Germany's work force. The 5.4%
wage hike they squeezed out of the government is, ironically,
precisely the amount accepted by the union and rejected by the
government when an arbitrator recommended it well before the
strike began on April 27. The union's chief weapon was its
shrewd, tough-talking president, Monika Wulf-Mathies, who
brilliantly calibrated the walkouts to demonstrate the union's
power without antagonizing the public. No more than 430,000
members stayed off the job at any one time, limiting the
strike's damage to levels other citizens could tolerate.
Business losses and public inconvenience were held to a minimum.
The tactic worked. Popular outrage was aimed at Kohl, not the
garbage collectors.

    That accorded neatly with Kohl's slide in public esteem.
The Chancellor's star has lost much of its luster since the
night the Berlin Wall came down. His 10-year-old conservative
coalition is unraveling, Germany's four-year economic boom is
expiring, and the government faces contentious decisions on
vexing social questions of political asylum and health-care
costs. The Chancellor is increasingly seen as lacking in
leadership. But western Germans are especially disgruntled over
the expense of unification and the amount of money the
government is transferring to the east: something like $1
trillion will flow from west to east by the end of the century.
"The state is taking money out of our pockets," wrote editor
Rolf Schmidt-Holtz in the weekly magazine Stern, expressing a
widely held western opinion. "People are embittered because they
are being deceived. The state has no more reserves; billions are
trickling away in the east to no effect."

    True, but if wages cannot be kept under control, German
children will also end up paying. By giving raises it cannot
afford, the German government will be forced to borrow to meet
payrolls. That, together with the unavoidable costs of bringing
eastern Germany up to western standards, will mean a chronic
budget deficit of $100 billion a year or more.

    Such spending runs against the grain for Germans brought
up in the flinty, pay-as-you-go atmosphere of the postwar
recovery. It put Kohl in a bind: he could choose to fight the
unions in a long, crippling strike, or he could choose
indebtedness. Either choice would hurt him politically, but in
the end, he opted to accept a huge debt in the year 2000, when
his career will be well over, rather than more chaos now.

    In fact, Kohl's government is already vulnerable.
Right-wing parties have showed surprising strength in recent
state elections. Kohl's Christian Democratic Union and its
Bavarian sister party, the Christian Social Union, are at their
lowest ebb in popularity since before unification. Their liberal
coalition partners, the Free Democrats, are faring even worse:
their standing in the polls fell sharply when their leading
light, Hans-Dietrich Genscher, announced his resignation as
Foreign Minister. Opposition Social Democrats, who enjoy a
healthy 41% approval rating, are insisting that they should join
Kohl in a "grand coalition" to get the country back under
control. Even some conservatives are toying with the idea,
although Kohl rejects it. All the party maneuvering could bring
down the government.

    Almost unheard from in the arguments are the hapless
eastern Germans. They were not part of the strike movement, even
though they earn on average only 62% as much as their western
compatriots -- those easterners, that is, who have any job at
all. At least 15% of the east's 9 million workers have no jobs,
and another 20% are marking time in programs that disguise the
true level of unemployment.

    "The western unions refuse to see that anything they get
will be swallowed by inflation," says Meinhard Miegel, head of
the Institute for Economy and Society, a Bonn think tank. "They
will do nobody any good, not even themselves." Kohl has tried,
in vain, to tell workers that. "The simple fact is that we
cannot live beyond our means in the long term," he said.
"Everyone must be aware that everything now pushed through on
the wages side beyond a reasonable level is definitely no longer
available for investment and jobs."

    After years of nonstop improvement, German workers are
loath to accept any reduction in their comfortable standard of
living. They are the most pampered and protected in the
industrial world. The average cost to employ a western German
worker -- in pay plus such benefits as comprehensive health
insurance and generous pensions -- is about $23 an hour,
compared with $15 for an American and $16 for a Japanese. That
is for an average workweek of only 37.5 hours. Annual vacation
is six weeks, plus at least 11 holidays a year. Educational
subsidies and compulsory national service mean that most young
people begin careers only in their late 20s or early 30s, and
then retire as young as age 60.

    Nor do the unions put much trust in Kohl's words. In 1990,
campaigning for election as the Chancellor of one Germany, he
promised "blossoming landscapes" in the east by 1994 and
insisted that "nobody will be worse off after unification." But
two years later the landscape is not blooming, and recovery of
the east is likely to take 10 years at least. Kohl said there
would be no new taxes, but the government enacted stiff "unity
surcharges" on income taxes last year. He promised to control
inflation, the economic hobgoblin of postwar Germany, yet it is
running higher than 4%. Last week Kohl seemed to misread the
public mood, blithely dismissing the labor unrest as "no real
crisis."

    The bill for unity must be paid. The best way to pay it
would be for Germany to remain the industrial powerhouse of
Europe, and that means workers willing to sacrifice for unity
now as they did for recovery in the past. A robust, expanding
economy can absorb the costs; a stricken, shrinking one cannot.