Germany's bloated welfare state Kohl acts: Chancellor's curbs aimed at restoring German competitiveness.

April 28, 1996

EVEN AS German Chancellor Helmut Kohl comes within reach of Otto von Bismarck's all-time record for longevity in office, he is taking dramatic action to reduce the size of the welfare state launched by the "Iron chancellor" a century and a quarter ago. The stakes are enormous. Saddled with pension benefits, health care costs, job security provisions and other social entitlements, the country regarded as the economic engine of Europe is in deep trouble.

Germany is losing its competitive edge, its reputation for hard work and, now, the government-management-union cooperation that made it a model for industrial harmony. Though it has taken the lead in the drive for a real European Union, its deficit could make it ineligible for membership in a common European currency arrangement.

Mr. Kohl in the past has ranted against a German work week that is too short and German vacations that are too long. But never before has he been quite so decisive. Signs of trouble are everywhere: a flat economy, double-digit unemployment and continued tensions between the western and eastern sectors of the country.

The chancellor has responded by proposing to slash federal and local spending by $32 billion, cut pension, sick leave and jobless benefits, raise the retirement age for women to 63 (from 60) and freeze public sector wages. Central to his plans are incentives to create jobs. He would give employers with up to ten workers power to fire employees without running a tough federal gamut. The present limit is five workers, an arrangement that has made many employers reluctant to increase payroll.

Unions and Social Democrats are predictably assailing this attack on what many Germans have come to consider their birthright. But Chancellor Kohl's political grasp has rarely been stronger. His center-right coalition clobbered the leftist opposition in March local elections. And no putative successor has emerged in his own Christian Democratic party.

A leader who pushed German reunification faster than many critics anticipated, Mr. Kohl seems poised to force changes in German society almost as fundamental. His past record of political success suggests he may triumph Bismarck-fashion once again.

Pub Date: 4/28/96

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