The Wall may have fallen, but Germany has yet to resolve its post-war economic problems. David Gow reports from Bonn
The German social market economy, engine of the country’s post-war renaissance, may have run out of steam well before the fall of the Wall, but the political battle to preserve its soul is only now getting under way.
There have been two defining moments recently in this debate. On June 15 about 350 000 Germans descended upon Bonn to stage the federal republic’s biggest post-war demonstration, against the Kohl government’s plans to axe DM70-billion of public spending. More protests are planned at plant level this week when Parliament debates Budget plans.
Sponsored (another historic first) by both trade union federations, DGB and DAG, the protest was against Bonn’s plans to postpone increases in child benefits and personal allowances, cut sick pay and raise the retirement age of women to 65.
Three days later, the German employers’ organisation, the BDI, brushed aside the protest. At the BDI’s annual conference, its president, Hans- Olaf Henkel, said: “I know nobody in industry who wants to question the social market economy.” But he added: “Our social system is at work undermining the foundations of our economy.” He went on to demand even deeper cuts in spending, comprehensive tax and welfare reform, more deregulation/privatisation and greater labour flexibility, including part-time working.
German industry whole-heartedly, the Bonn government half-heartedly (since it will ultimately make concessions on its Budget plans) and even German workers surreptiously (since many are quietly tearing up long-standing bargaining arrangements) are signalling a cultural shift. The alternative, they sense, would be a further decline in competitiveness, greater loss of markets, higher unemployment and stiffer taxation.
Their dilemma is heightened by the prevailing economic conditions of low to nil growth (at best 0,75% this year); record levels of joblessness (10%); continuing deflation at low levels of price- rises (1,4%) to aim for the budget deficit criterion of 3% for European currency union; and lack of consumer confidence. It will be a long and troubled march.