Partisan Gridlock Jobs, Investment Pact Talks Falter

Employers, trade unions and the German government are at odds over how to develop a new pact between business and labor to sustain new jobs and profit.
Still on the same page? Industry association head Ulrich Grillo, trade unionist Detlef Wetzel and Economics Minister Sigmar Gabriel (l-r):

Three months ago, the German economics minister heralded a new alliance between business and labor as the “future of industry.”

“Germany needs a concerted initiative of politicians, business associations and trade unions to remain a successful industrial country in the 21st century,” Sigmar Gabriel said on November 25.

Joining Mr. Gabriel, a Social Democrat, was Ulrich Grillo, the president of the Federation of German Industry, the country's main industrial lobbying group, and Detlef Wetzel, the chairman of IG Metall, Germany’s largest trade union.

The partners agreed – in principle – to fight for greater support, more investment and more job security in industry.

But already, before they convene for their first meeting on March 3 to discuss details, the first rifts are beginning to show.

Broad alliances between German industry, government and labor –which might be considered politically impossible in the United States – are common in its social market economy. In the 1990s, then Chancellor Gerhard Schröder brought together the troika to push through  a set of unprecedented cuts in Germany's social welfare benefits, which ended up fueling economic growth.

For much of the last decade, German labor unions pledged to moderate wage demands in exchange for job guarantees, a pact that limited employer costs and preserved employment while allowing German firms to stay competitive and weather economic downturns.

As Germany's economic growth has slowed amid western economic sanctions levied on one of its major trading partners, Russia, political leaders led by Mr. Gabriel, who could be the SPD challenger to Chancellor Angela Merkel in 2017, are aiming for a new agreement to keep the economy expanding.

But the latest effort has bogged down along the usual lines in Germany, with employers and labor jockeying for a deal that best suits their interests. Added to the mix is Mr. Gabriel, who has been trying to cast a more moderate, business-friendly image in the run-up to the next election.

The trouble began with the official invitation to the opening meeting.

Along with the invite, the ministry had enclosed a document laying out the structure and procedures it expected for the alliance.

The industry federation's general manager, Markus Kerber, didn't like it. So he wrote to the economics ministry, and criticized the “very detailed, statute-like rules” the government wanted to impose on the alliance.

Handelsblatt has obtained a copy of Mr. Kerber's letter. In it, he said he had consulted with other alliance partners, including employer and industry groups, and the business sector feared politicians were taking charge of the whole project and not considering its interests, he said.

The members of the alliance should be playing the same tune, Mr. Kerber wrote, “but ideally one that several orchestras can play.”

I don’t think the whole thing was intended as a love-in. Industry Alliance participant

At a preliminary meeting on Tuesday, business representatives voiced reservations about the rigid structures ­– and were listened to.  Those who attended reported that not everything is running smoothly yet, and all the documents needed to be reviewed again.

Reportedly, everyone is in agreement about the objective: To maintain industry’s 22-percent share of the country's overall economic performance – which is high by any international comparison – so it continues to produce new jobs.

But employers, trade unions and the economics ministry all have different ideas about the specifics of many issues.

The alliance is “a long way from being done and dusted,” said an inside source.

Before the next meeting takes place at top management level, the partners will convene in working groups to discuss and coordinate ideas for investment and the future of work – and supply chains.

An additional working group on "international competitiveness" was added under pressure from business representatives. Competitiveness can only be maintained, a source said, if it is permissible to “build the occasional road or factory.”

Discussions have been controversial, because employers and trade unions naturally have different opinions about issues like relocating jobs.

“I don’t think the whole thing was intended as a love-in,” said one participant.

But even before substantive debates take place, there are several procedural arguments that have bogged down the talks. For example,  financing a planned foundation for “the future of industry.”

The idea is for the foundation to provide scientific input to the alliance, help improve social partnership and investment conditions and to campaign for greater support of industry.

But the industry federation’s letter claims that employers’ and industrial groups see “no such need for a foundation.” If the economics ministry considers the foundation necessary, they said, then it should also provide the funding.

Opinions are also divided about how far the alliance should be institutionalized. One participant said he does not think it should form its own association, complete with a “punchy logo.”

There are also fears that the many different platforms for dialogue – for example, on investment, energy efficiency or Industry 4.0 – could lead to duplicated work.  The alliance should therefore have an “unbureaucratic working structure in place” to oversee "various work flows.”

Alliance partners don’t have much time left to get their ideas in harmony. If they don’t succeed, according to the industry federation, Mr. Gabriel, Mr. Grillo and Mr. Wetzel will be forced on March 3 to “face the press...without a coherent overall concept."


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