Weiss warns of deep recession in Germany

GERMANY runs the risk of 'plunging into a lengthy recession accompanied by sharply rising unemployment', Heinrich Weiss warned yesterday following his stormy resignation on Monday as head of the Federation of German Industry (BDI).

The only way to avoid such calamity, Mr Weiss said, speaking far more openly than he had ever dared as BDI president, was via a radical reduction in pay settlements and drastic cuts in public spending in western Germany.

At the same time, senior industrialists and government party members called for Monday's settlement at Lufthansa, the troubled state airline, to exert a 'pioneer effect' on wages and working hours throughout the economy.

Aware of the dire straits Lufthansa is in - the airline expects an operating loss of DM1.2bn (pounds 441m) this year - the unions agreed to postpone a wage increase for a year; longer, more flexible working hours, and the shedding of 8,000 jobs.

The ruling Christian Democratic Party's economics spokesman, Matthias Wissmann, said yesterday that the accord marked the way forward for all companies in difficulty. The notion of uniform wage settlements covering entire sectors can no longer apply, he suggested. Hans-Joachim Gottschol, head of the engineering employers' federation, Gesamtmetall, said the Lufthansa agreement indicated a fundamental willingness by unions to adopt a new approach.

Meanwhile, Mr Weiss' resignation continued to send shock waves through the economy yesterday as it was interpreted as yet another sign of industry's dissastisfaction with the Bonn government. Mr Weiss made no secret of what he termed the 'insufficient contacts between senior managers and the chancellery'.

He said a drastic change of heart by government was needed if the negative effects of its failure to cut public spending were not to draw the economy down. The risk of a recession can be seen, he said, in sectors such as machine tools and chemicals, which are sliding rapidly downwards. Real output in western Germany fell by 1.5 per cent in the second quarter of this year and is expected to decline a further 0.5 per cent in the three months ending 30 September.

Mr Weiss said the western German states must make deep cuts in public investment in order to release funds for the east, while the unions must accept that living standards in western Germany cannot be raised significantly, allowing growth to be pushed instead into the east.

Start your day with The Independent, sign up for daily news emails
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific