Kohl's victory on cuts clears way for EMU

Austerity Germany: Coalition jubilation as parliament approves pounds 30bn package that ends the post-war welfare consensus

The odds on European Monetary Union arriving on schedule shortened significantly yesterday as the German government's controversial austerity programme cleared its final parliamentary hurdle.

With DM70bn (pounds 30bn) lopped off next year's budget at a stroke, Germany is within sight of the target laid down by the Maastricht treaty. Member states wishing to join the first wave of EMU in 1999 must keep their budget deficit below 3 per cent of GDP next year, and limit their public indebtedness to 60 per cent of GDP.

Without the cuts proposed by Chancellor Helmut Kohl, Germany would have disqualified itself from EMU, ending the entire project, as ministers pointed out to waverers during the debate. "This is an important decision day for Germany. The eyes of the world are upon us," Theo Waigel, the Finance Minister, told MPs.

In the end, the package went through with four votes to spare, but the government whips left nothing to chance, mobilising all their infirm MPs as well as the able-bodied. Michael Glos, a senior Christian Socialist who had recently undergone a stomach operation, was flown in from Bavaria by helicopter, flanked by a doctor and a nurse. Jochen Borchert, the Agriculture Minister, who is recovering from spine surgery, was also in attendance.

The relief on the government benches when the result was announced was palpable. Mr Kohl slapped his thighs in delight and ministers of the three coalition parties leapt off their seats to congratulate one another.

On the other side of the house, there was only bitterness and forlorn demands for the government's resignation. The trade unions, whose stall near the parliament building had been bombarding the politicians with combative slogans through a booming public address system, appeared disheartened. "This is Black Friday for the welfare state," one union official lamented.

Oskar Lafontaine, leader of the opposition Social Democrats, said: "The policies of social injustice will merely raise unemployment and public deficits. Resistance will grow."

There was, however, little evidence of unrest in the streets. The strikes staged by the unions since early summer have fizzled out and the mass rallies are becoming less massive by the week. After the vote yesterday, only five people were consuming the free wurst at the union stall.

The government programme aims to slash welfare spending and stimulate the sagging economy. Sick pay, which at present amounts to 100 per cent of average wages, will be cut to 80 per cent. The dole is being cut, as well as funds for job-creation programmes.

The retirement age for women is to be raised over the coming years from 60 to 65 and men's from 63 to 65. The most contentious part of the package deals the most savage blow to workers' rights since the Second World War. Workers of enterprises employing fewer than 10 people will no longer be protected from dismissal. The unions say this opens the way to rampant capitalism of the Anglo-Saxon kind, heralding the age of the "McJobs", and the end of the post-war consensus on the welfare state.

"I have here a picture of a man confined to a wheelchair," Rudolf Scharping, the Social Democrats' economic spokesman, said. "He works despite his limitations. And now you are throwing him into a social welfare net - one which you claim contains only lazy people and shirkers."

But economists, industry and even large sections of the population support the government view that Germany's public spending must be slimmed down. The country is slowly emerging from a recession but with no new jobs in sight. Unemployment, at a post-war record of 4 million, is set to stay, but the opposition has failed to convince the voters that it has better ideas for putting Germany to work again.