Fewer holidays in the sun: Three years after unification, Germans fear welfare cuts. But their system remains generous, says Steve Crawshaw

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TO READ the German headlines, you would think that the end of the world is nigh. A recent cover story in the influential Spiegel magazine asked: 'What can save the economy?' and depicted the sinking ship Germania lost in a stormy sea. According to Der Spiegel's not untypical analysis, the situation is 'catastrophic'.

Certainly, Europe's economic giant has shown itself to have feet of clay. Industrial production is down and unemployment has risen sharply. The Sparpaket, or 'savings package', due to be approved during Germany's current parliamentary session, is intended to lop some DM28bn ( pounds 12bn)off the country's annual welfare bill in the next few years. The tone of the discussions suggests an unprecedented Thatcherite assault on the welfare state.

This gives cause for Schadenfreude across the Channel. It is reassuring for the British to think that the nation of Vorsprung durch Technik has fallen flat on its economic face.

The changes can, however, be seen as trading down from a 7-series to a 5-series BMW. Despite what some in Britain might wish to believe, the German economy three years after unification is still rich - and so are the benefits.

Thus, for example, employers last week proposed a wage cut that was greeted with banner headlines in Germany's biggest-selling daily. 'Shock for millions - no holiday money', cried Bild. Translated: the average six weeks' holiday for a German metal-industry worker would be paid only once, not twice. Until now, they have received 50 per cent of their wages for 30 working days in addition to their fully paid leave. The manner in which the employers announced the change was confrontational, but the result could hardly be described as miserly.

It is the same story in the state sector. Theo Sommer, publisher of the liberal weekly Die Zeit, recently wrote: 'The croaks of the doomsayers can clearly be heard. It is said that Germany is facing collapse, as an industrial economy, and that our social security system is crumbling. Admittedly, complaining is important. But we shouldn't overdo the laments.'

Mr Sommer warns against turning towards Thatcherism, but argues: 'We can certainly make our welfare pudding with less cream and fewer eggs.'

One example of the rich German mix is the so-called 'bad-weather benefit', paid by the state to building workers when rain stops work. This is to be cut - a proposal that has caused indignation among employers and employees alike. Britain has never had a state bad-weather payment for building workers (though agreements are sometimes made with individual employers).

The biggest proposed cuts are in unemployment benefit. This, in a move unknown in post-war Germany, is to be slashed by a hefty DM3.5bn in the coming year. What that means is a reduction of 3 per cent on benefits paid to 64 per cent or, at bottom whack, 55 per cent of previous wages. Average wages in western Germany are around DM4,000 (pounds 1,600) per month, so that a typical lower- bracket unemployment benefit might be around DM2,200 ( pounds 900) a month. In Britain, by contrast, average earnings are around pounds 900 a month, and unemployment benefit is typically about a third of that.

The pattern is the same across the board. Family benefits are being cut (eg, child benefit will no longer be available to those who do not have legal permission to stay in Germany; remarkably, this is a change from previous policy). After the cuts, however, Germany will still be paying out around half as much again as the UK. Even given Germany's higher cost of living, the difference is startling.

In almost every respect Germany and Britain still inhabit different worlds. To take one small example in the area of municipal spending: within a short drive of where I live, on the edge of Bonn, there are half-a-dozen public swimming pools, each of which has better facilities and is better maintained than any I have seen in the UK. The pattern is repeated across western Germany. In terms of national prosperity, a Briton in Germany sometimes feels as outclassed as a Russian visiting the West for the first time, who gazes in disbelief ('Could my country ever match this?') at the shelves in Sainsbury's, or the stores in Covent Garden.

Even Germany's worst tower blocks can scarcely be compared with the damp and decaying accommodation that is almost the norm for public housing in the UK. The poverty, in western Germany at least, bears no relation to the quasi-Victorian landscape (beggars and young homeless throughout central London), which Britons have come to take for granted - as unsurprising as frequent bomb scares or pubs that close at 11pm.

In a recent round-table discussion, a German television correspondent in London expressed her surprise at the tone of the debate at home. 'In Britain, there is much real poverty. Here (in Germany) everybody complains so much.'

The point is that when west Germans complain about Germany's new poverty, they are referring to the downturn of the west, not to the stark poverty of the east. They regard the easterners as an expensive nuisance. Hundreds of billions of marks have poured, and continue to pour, into the former Communist nation. True, this is not a bottomless pit: the transformation of the infrastructure, and the visible new investment in the east, has been astonishing for anyone who knew the old, Communist GDR. None the less, the cost has been staggering, and, hardly surprisingly, has weakened the west German giant.

Ordinary east Germans are still at a huge disadvantage. In purely economic terms, they are better off than, say, the Poles and Czechs, former fellow-inmates in the Communist camp. But they are much worse off than their west German cousins with whom they now share a country; wages are a third lower, and unemployment is twice as high.

In addition to the unique problems created by German unity, the country has a serious problem of middle-aged flab. Admittedly, Germany still looks competitive when compared with Britain. But Britain is rarely taken as a point

of comparison. Instead, Germany compares itself endlessly with Asian countries, which are seen as the real economic threat. To quote Theo Sommer again: 'In a world economy where all the players have started panting and wheezing, the Germans, too - top of the class only yesterday - are painfully out of breath.'

The economic problems may force Germany to go on a slimming cure, which most agree was in any case needed, with or without unity. Unlike in Britain in the Thatcher era, however, the 'welfare state' is not about to become an ideologically dubious concept; 'trimming' is not a code word for 'tearing apart'. Even the Social Democrat opposition, which has opposed the terms of the government's savings package, insists that it is not against cuts as such, only that the pain has been wrongly distributed.

Whoever comes to power in next year's elections - at present Helmut Kohl's Christian Democrats and the Social Democrats are almost equally unpopular - further cuts will be inevitable. In that sense, the traditional post-war German consensus still rules. But reports of the death of the German welfare state are indeed premature.

(Photograph omitted)