International Outlook
Edited by Rose Brady
It's Election Time, and Europe's Unions Smell Blood
Election season is coming to the heart of Europe, and the Continent's still-powerful trade unions sense opportunity. As France prepares for a presidential race in April and Germany gears up for national elections by next fall, organized labor is stepping up demands for pay increases, shorter working weeks, and better conditions. French bank workers even plan a strike on Jan. 2 to demand more money for the extra work involved in introducing the euro. "We want the government to hear the voice of the labor movement more loudly and more often," says Pierre-Jean Rozet, a board member of France's General Work Confederation.
The rising union activity promises to pose a tough challenge to both French Prime Minister Lionel Jospin and German Chancellor Gerhard Schröder. They will have to decide whether to appease the unions to win their support or to take them on at a time when the European economy is sliding into recession. If the leaders cave in, the result could be higher wages, rising costs, and lower productivity, just when Europe needs more labor flexibility.
BAD MEMORIES. Jospin, facing an uphill battle against incumbent Jacques Chirac for the presidency, is already feeling the heat. On Dec. 4, 24,000 gendarmes staged an unprecedented strike for higher wages and new hires. After four days, Jospin's government agreed to raise their wages by 8% and hire 4,500 new officers as part of a $220 million settlement. "If the government stops [giving to the unions] here, then it'll be O.K.," says Marc Touati, chief economist at Natexis Banques Populaires. "If they give in to everyone, it will be expensive." French teachers, customs officials, and prison guards are all threatening to strike ahead of the first round of voting in the presidential race on Apr. 21. With its budget under strain, the government can't afford to boost compensation across the board. But prolonged stoppages would remind voters of the transport strikes of late 1995 that contributed to the downfall of Jospin's predecessor, Prime Minister Alain Juppé.
In Germany, meanwhile, Schröder faces a challenge from the powerful metalworkers union, which controls the shop floors of the all-important auto industry. On Dec. 10, IG Metall demanded wage increases of 5% to 7% for 2002--10 times the forecast inflation rate. IG Metall Chief Klaus Zwickel is threatening to call a strike next spring if employers do not cut an "acceptable" deal in talks due to begin in February. The metalworkers typically make oversize demands early in the negotiating process, and some economists predict the union will eventually settle for 2.5% to 3%. But even that could hit the economy, which is forecast to grow less than 1.5% next year.
WATERED-DOWN REFORMS. While Schröder is not directly involved in labor negotiations, he could call on the unions to exercise restraint, just as he did in 2000. But with the election coming, few analysts expect him to do that. The unions have pulled Schröder left from the centrist path he took earlier in his term, blocking labor market reforms. Meanwhile, since IG Metall sets the tone for other negotiations, a hefty pay raise for metalworkers "could set an example not only in Germany but very possibly in other countries--and not a good one," warns Gert Schröder, manager of labor relations for United Parcel Service Deutschland Inc. and spokesman on labor issues for the American Chamber of Commerce in Frankfurt.
Indeed, other unions are already acting feisty. Even a modest reform by Prime Minister Silvio Berlusconi has been strongly opposed by Italian unions. It looks like 2002 may be the year of labor in Europe.
By Christine Tierney in Frankfurt and Christina White in Paris
GLOBAL WRAPUP
The U.N.'s Afghan Worries
Even before the international community's effort to rebuild Afghanistan's economy has started, fears are growing in Kabul that it could be derailed. Leaders of the Northern Alliance are scheduled to transfer power on Dec. 22 in Kabul to a U.N.-brokered transitional government under the leadership of Pashtun leader Hamid Karzai. But some Afghan factions are balking because they feel the new government doesn't give them enough power. And some Northern Alliance military leaders are refusing to withdraw their troops from the capital.
That is causing some U.N. officials to worry publicly that fighting could break out in Kabul on Dec. 22 and ignite a whole new civil war. "Afghanistan has been rather in the Middle Ages for some time," says Elaine Duthoit, head of the U.N. Office for the Coordination of Humanitarian Activities in Afghanistan. "I'm quite worried about the future." A U.N. team is currently in Kabul to study humanitarian, infrastructure, and other needs--a critical step before the international community can begin channeling billions to the country.
There isn't a moment to lose. Winter is settling in over the drought-stricken country, the hills around Kabul are capped with snow, and hundreds of thousands of refugees in the countryside are without food. U.N. envoy Lakhdar Brahimi is aiming to iron out differences with disgruntled military leaders--and pave the way for an international peacekeeping force--so Karzai can form his government and relief funds can flow.
By Michael Shari in Kabul
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Copyright 2001, Bloomberg L.P.
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