Kohl buys peace by caving in to unions

IGermany averted a summer of strikes in the public sector yesterday, but at a price that looks set to bust its budget ahead of European Monetary Union.

After a series of warning strikes, a huge trade union demonstration and rebellion within government ranks, Chancellor Helmut Kohl's budget has become significantly less austere than was intended. Economists calculate that in 1997, the year when applicants must bring their budget deficits to within 3 per cent of GDP to qualify for monetary union, Germany's deficit will be about 3.5 per cent.

The final blow against Mr Kohl's "savings package" was struck yesterday by the public employees' trade union, OTV, which settled for a 1.3 per cent pay rise for next year, on top of a one-off payment of 300 German marks (pounds 130) each. The government had offered no pay increase for two years, but caved in after a month of well-coordinated strikes, which paralysed different towns on different days.

The cost of its retreat is DM4.1bn, but Mr Kohl has also been rowing back on welfare cuts. The pension age for women will not, after all, be raised to 65, sick pay might not be cut by 20 per cent, and child benefits will increase by 10 per cent next year.

Thus, the original budget cuts of DM50bn have been whittled down to about DM35bn. Politicians attribute the German economy's woes to labour costs, which are the highest in the world. These accrue from the heavy social security contributions, which Mr Kohl has tried - and now failed - to cut.

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs General

The Green Recruitment Company: Operations Manager - Anaerobic Digestion / Biogas

£40000 - £45000 Per Annum: The Green Recruitment Company: Job Title: Operation...

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

Recruitment Genius: Assistant Maintenance Person

£7 - £8 per hour: Recruitment Genius: This care organisation take pride in del...

Recruitment Genius: Care Worker

£7 - £8 per hour: Recruitment Genius: This care organisation take pride in del...

Day In a Page

Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
Tourism in Iran: The country will soon be opening up again after years of isolation

Iran is opening up again to tourists

After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
10 best PS4 games

10 best PS4 games

Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
Transfer window: Ten things we learnt

Ten things we learnt from the transfer window

Record-breaking spending shows FFP restraint no longer applies
Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

‘Can we really just turn away?’

Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

Nine of Syria and Iraq's 10 world heritage sites are in danger...

... and not just because of Isis vandalism
Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

Girl on a Plane

An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
Why Frederick Forsyth's spying days could spell disaster for today's journalists

Why Frederick Forsyth's spying days could spell disaster for today's journalists

The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent