STRIKE SETTLEMENT CLOUD BEHIND WEST GERMAN SILVER LINING OF ECONOMY

Press, Volume CXIV, Issue 33479, 9 March 1974, Page 14

STRIKE SETTLEMENT CLOUD BEHIND WEST GERMAN SILVER LINING OF ECONOMY

! B y

ANDREW HARGRAVE.

reporting to t/ie "Financial Times." from Frankfurt.)

(Reprinted by arrangement!

Reaction to the ending of three-day country-wide public utilities strikes in W est Germany last month has varied from relief to extieme gloom at the first major double-figure pay settlement since the Koiean War. Even more disturbing than its effect on inflation, serious as it mat be, are the growing doubts about prospects for the social contract toige< by the two sides of industry in the atmosphere of co-operation aim togetherness following a lost war and galloping inflation. It is dimcult W deny an inflation-boosting and morale-shattering impact tor t m settlement, which amounts to a 12.5 per cent axerage increase lor neai 4m people and will cost an estimated £2400m a year which cannot >ui lead to further increases in taxes and public service charges, including rail fares and postal rates. bility.

There is no denying either! that the public utilities deal lis bound to encourage the> unions representing well over 5m people now in the pay-queue. The undoubted joker in the pack is the Metalworkers Union, with 3.6 m members and a claim for increases ranging from 15! to 18 per cent which comes: on top of substantial fringe benefits wrung from employ-; ers last autumn. Nor it this all. Certain: large employers such as Volkswagen, which negotiate independently, claim to suffer an even heavier impact from a substantial settlement. Mr Rudolf Leiding, executive chairman of i Volkswagen, maintains that the claim his company now faces would, even if met only two-thirds of the way, increase wage costs in the German factories by around 13 per cent of the value of total 1973 sales and put an I average of £l5O extra on each new car. It is, of course, no surprise that these sombre prospects are spotlighted at ia time when negotiations on the metalworkers’ claims are' ;on the verge of breaking; down, with the employers'! offer still at the original 8.5 i per cent — the precise fig-1 ure of last year’s settlement. In this battle of power and wits, the union negotiators are led by Mr Eugen Loderer, 53, president of the Metalworkers’ Union for less than two years and a rather 1 different character from his . predecessor, the late Otto Brenner, one of the original creators of West Germany’s ’post-war social contract.

Mr Loderer — like Mr Heinz Kluncker, 48-year-old president of the largest public service union — sees his job in a different light from Brenner and his contemporaries. It is, to put it [crudely, to protect the living . standards of his people in an age of accelerating inflation [and to gain a little more to I ensure a continuing rise in Those standards. Economic growth One may assume that, [with official predictions of

I “nil to 2 per cent " economic growth and 8 per cent or I more inflation this year. Mr Brenner and his generation might not have tabled claims ifor rises of 15 per cent and over. But neither Mr Loderer and Mr Kluncker, can remotely be c. ed Left- [ wingers. Both reflect the imood and aspirations of their ( members just as much as their predecessors did. That mood and those aspirations in turn reflect the assumption of automatically rising living standards, common not only in West Germany but throughout the world, which even the oil crisis has not managed to damp. The idea, so prevalent in other, admittedly more strike-prone Western countries including Britain, that “Germans do not strike” is just as much a myth as that of super-efficiency or sheeplike obedience.

As recently as 1971, the year of major strikes in the motor industry and even bigger lockouts involving nearly half a million people, almost 4.5 m working days were lost in West Germany, ■slightly more than in France that year though only oneIthird of those in Britain ! After the calm of the next year, 1973 again showed a rise, with 184,000 people involved— again the majority in the motor and allied industries — leading to the loss of 563,000 working days. Both figures have already been exceeded this year through strikes in public services. There are signs of even bigger trouble ahead in the engineering, electrical, ship-building and motor industries. Government concern

This confrontation in major sectors of the West German economy is, of course, deeply worrying to both Government and industry. That is why last month’s deal in the public utilities after Chancellor Willy Brandt’s repeated declarations about the dangers of two-figure settlements has been so damaging to his and his Government’s credi-

There are already forecasts, assuming a zero to i two per cent economic [growth rate this year, of [| prices rising 8.5 to 9.5 per cent in 1974 and unemployiment to a 2.5 per cent average or 800,000 at its peak. But, while Germans are apt ■lto view their own situation [in an extremely pessimistic light, it is as well to keep it in a world perspective. West Germany’s annual rate of inflation, at the (equivalent of 7.4 per cent, in January, was still the lowest lin Western Europe. Its 1973 balance of payments surplus of D.M. 9500 m (over £1500m), boosted by a record trade surplus of DM. 33,000 m. and gold and currency reserves of D.M. 80,000 m disclosed last week, is capable of absorbing the impact of escalating oil import costs better than any of its European Community partners. ( Export orders in the key engineering, electrical and (steel industries are keeping (up well in spite of the ■currency changes which [have made German exports ( increasingly more expensive (over the past four years.

Confident voices Indeed, the voices of despair are matched by those confident that the country’s products will continue to sell abroad, notwithstanding higher prices, on the still valid grounds of high quality and reliable delivery. Bv and large, they believe, the economy to be resilient enough to absorb the shock of even double-figure pay settlements. On the other hand, it must also be said that West German society still seems more brittle than those of the more lackadaisical, irresponsible but perhaps for this reason more flexible and tolerant communities elsewhere in Europe. The recent confrontation at Frankfurt University between the authorities and students, which led to a six-week suspension of lectures in several departments and followed similar unrest at others, might not in itself have meant much had it not beep for the reaction it provoked in the more conventional sections of the community.

The spreading of confrontation of this sort to other sectors of the social fabric is a question exercising the minds and attention of many thoughtful Germans — and not only Germans. There is even fear that, at a possible time of slow or no growth, high pay settlements eroded almost immediately by high prices could encourage forces of the extremes, right and left, (to attempt to destroy the (social and political edifice rebuilt after the Second World War.