NEWS ANALYSIS : Strikes Reflect New German Austerity

Germany’s most serious outbreak of labor unrest since the tumultuous days of the Weimar Republic is a symptom of far deeper, more fundamental changes under way in Europe’s bellwether economy.

The main cause of public service strikes--the government’s refusal to accept an independent arbitrator’s proposed 5.4% annual wage hike--reflects Bonn’s assessment of the need for immediate and unprecedented fiscal belt-tightening in order to pay the staggering costs that have landed on Germany in the wake of the Cold War.

The estimated $1.6 billion the government reckons it would cost to bridge the gap between the proposed settlement and its own “final offer” of 4.8% is one additional burden too much for the public purse, according to Interior Minister Rudolf Seiters, who has presided over the talks for Chancellor Helmut Kohl’s government.

Trade union leaders Tuesday showed little sympathy for such assessments, pledging to escalate stoppages that have already paralyzed public transportation and postal services in several major cities.

On Tuesday, garbage collectors in three states failed to work, long-distance rail service was badly disrupted and public transportation in many cities did not operate.

Strikes are expected in other parts of the country today.

“We will strike for as long as it requires our employers to present us with an improved offer,” declared Monika Wulf-Mathies, head of the country’s main public service union.

Today, the wave of strikes is also expected to spill into Germany’s large industrial sector with leaders of the metalworkers union, IG Metall, calling for a series of nationwide one-day stoppages.

Few here would argue that unification and the end of the Cold War have not thrust new and heavy burdens on Germany.

Government officials admit that the Kohl administration badly misjudged the size of the task of reviving eastern Germany from the effects of four decades of Communist central planning.

Initial projections that the eastern region would require an injection of around $60 billion per year for a decade in order to reach western German levels have since been doubled or tripled, depending on who is doing the predicting.

Saxony’s respected Minister President Kurt Biedenkopf recently revised his view, declaring that massive transfers of well over $100 billion from west to east will be required for 20 years, not 10, in order to equalize prosperity levels.

Eastern Germany is only one post-Cold War drain on Germany’s public purse.

Geographical and political imperatives have also made Germany the biggest single aid contributor to the successor states of the former Soviet empire.

Of the estimated $39 billion in Western aid pledged to the former Soviet Union between September, 1991, and January, more than $22 billion emanated from Germany.

Bonn is the biggest single aid donor to the other former Communist countries of Eastern Europe and has been saddled with additional costs due to the influx of immigrants and asylum-seekers from the region following the collapse of communism. To pay these bills, Kohl invoked an unpopular one-year income tax surcharge but has relied mainly on deficit spending, a tactic that has pushed Germany’s cumulative federal, state and local government budget shortfalls from $7.9 billion in 1989 to more than $83 billion last year.

Germans Press for More Pay

Tuesday’s strikes by public workers were concentrated in North Rhine-Westphalia, Germany’s most populous state, which includes Bonn, seat of the federal government. The strikes are occurring across the former West Germany. Eastern Germany has different labor regulations.

The strikers’ demand: Unions called for the work stoppages to back up their demand for a 9.5% pay increase to compensate for 4.8% inflation and tax increases imposed last year to bail out troubled eastern Germany. The government has rejected an arbitrator’s proposal of 5.4%.

Government’s response: State and federal governments say they cannot afford to pay such wages, which economists warn could worsen Germany’s slowdown and cause greater inflation.

Germany’s Soaring Deficit

Germany has seen its dynamic economy hurt by the global recession and mounting bills to revive eastern Germany and aid the former Soviet Union. 1989: $7.9 billion 1990: $36.1 billion 1991: $83.4 billion (cumulative deficits for federal, state and local governments)