Bloomberg News

Germany May Turn to Labor Programs as Crisis Worsens, Union Says

July 11, 2012

Germany’s industrial workforce is bracing for a global slowdown by mulling some measures last used during the financial crisis to save jobs, said Berthold Huber, chairman of Europe’s largest manufacturing union.

“The experience from 2008 has taught us that an economy can slump within the shortest period of time and as a union, we need to be prepared for that,” Huber, chairman of IG Metall, said in an interview in Frankfurt on July 4. “For such an event, we need crisis measures. Germany won’t be able to fully decouple from an economic downward trend in Europe.”

German unemployment has been pushed higher over the past three months, ending a two-year drop that has taken the jobless rate to the lowest since the country’s reunification. With Europe’s sovereign debt crisis damping global growth and curbing demand for German goods, Huber said IG Metall is already in talks with manufacturers to gauge the need for special measures.

The measures, which would have to be approved by lawmakers, include a lengthening of the period of time people can work short hours, tax measures to boost domestic demand and increased investment on research and development, according to Huber, whose union represents some 2.25 million workers at companies including Daimler AG (DAI) and Siemens AG. (SIE)

Germany limited the increase in unemployment during the crisis with a state-sponsored program introduced in 2009 that allowed companies to put workers on shorter working weeks to reduce costs while the government paid part of the remaining wage. The short-term work program lost significance as demand for staff increased, the Labor Agency has said.

Cost Cuts

Companies across Europe are looking for ways to lower costs as the region’s economic slump shows signs of deepening. Euro- area unemployment jumped to 11.1 percent in May, a record, with Spain’s at 24.6 percent and Portugal’s at 15.2 percent. In Germany, the comparable adjusted jobless rate was at 5.6 percent, according to the European Union’s statistics office.

While Germany’s economic expansion helped the euro area avert a slump in the first quarter, Europe’s largest economy has since shown increasing signs of slowdown. German business confidence fell to the lowest in more than two years in June and investor sentiment slumped the most in 14 years. German manufacturing output also declined last month.

European leaders have focused on budget cuts to fight the region’s turmoil, undermining consumer demand and exports. The International Labour Organization, ILO, said in a report on July 11 that policy makers risk putting 4.5 million more people out of work unless they recalibrate their crisis-fighting measures toward promoting employment in the 17-member area.

“Savings programs by themselves won’t lead us out of this crisis,” said Huber, who sits on the board of companies including Volkswagen AG (VOW) and Siemens. “Europe needs to promote science and development as well as productivity growth.”

To contact the reporters on this story: Joseph de Weck in Frankfurt at jdeweck@bloomberg.net; Annette Weisbach in Frankfurt at aweisbach1@bloomberg.net

To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net; Benedikt Kammel at bkammel@bloomberg.net


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