[A-List] Germany: union bureaucracies buckle

[Michael Keaney]

Unions soften on German welfare reforms
By Hugh Williamson in Berlin
Financial Times: December 13 2002

Germany's powerful trade union movement yesterday signalled it may be ready
to accept changes to the country's overburdened health and pension systems.

As the new welfare reform commission, set up by Gerhard Schröder, the
chancellor, was preparing to meet for the first time today, the most senior
trade union official on the panel voiced a willingness to find common ground
with reformers.

In recent weeks the unions, led by the DGB national union federation, have
opposed suggestions from economists and others that pillars of Germany's
generous welfare state needed a radical overhaul in the light of the ageing
population, rising costs and changing employment structures.

Since his re-election in September, Mr Schröder has targeted the long-term
restructuring of statutory health and pension provision as a key reform
project for his second term in office. He set up a 26-person commission "to
make recommendations on ensuring the financial sustainability and further
development of these social insurance systems".

The commission is headed by Bert Rürup, a prominent economist and pensions
expert who has advocated changes that include raising the pension age from
65 to 67 and delinking the financing of statutory health funds from income
levels in order to reduce non-wage labour costs.

Ursula Engelen-Kefer, deputy head of the DGB and the leading trade union
representative on the commission, told the Financial Times: "I'm sure we
shall be able to come to agreements with Mr Rürup."

Trade union support would be required if the commission is to draw up
unanimous conclusions when it presents its findings in October 2003.

Mrs Engelen-Kefer admitted, however, that conflict within the commission was
likely. She ruled out abandoning fundamental trade union positions. "Despite
the problems and needs for reform [in the health and pension systems], our
welfare state represents the best way forward. We don' want to give it up
unless absolutely necessary," she said.

"The system is not about to collapse," she added, responding to economists
who argue for instance that, despite the pension reform in 2001, the current
pension levels will, within a few years, no longer be payable because of the
ageing population.

Despite Mrs Engelen-Kefer's compromise signals, there were only limited
prospects of any radical reform proposals from the commission - if they were
to emerge - being adopted by the government, analysts admitted.