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BONN -- German employers are braced for the shock wave likely to flow out of last week's landslide victory of Social Democrat Gerhard Schroeder over Chancellor Helmut Kohl, a Christian Democrat.
Mr. Schroeder has signaled his intent to form a coalition with the environmentalist Green Party, and the result may produce the most radical alliance in postwar Germany's history.
Mr. Schroeder's election bodes ill for the employer-sensitive areas of social insurance and health reform. The Social Democratic Party has pledged to reverse pro-employer reforms pushed through by Chancellor Kohl's conservative government. But the all-dominating issue of high unemployment likely will hinder Mr. Schroeder from pursuing anything but a moderate course.
Last month, German employers and representatives of industry pledged to form an "alliance for jobs" with the new Schroeder government and unions. Dieter Hundt, president of the German Employer Assn., said election results were disappointing, but he said he would work with Mr. Schroeder to reach a consensus on "badly needed" social insurance and tax reform.
Nevertheless, skepticism remains. Hans Olaf Henkel, president of the Federation of Industry, warned that a "red/green" coalition -- the SPD is commonly characterized as the "red" party -- threatens foreign investment and the movement of foreign companies into Germany. Mr. Henkel said high labor costs, resulting largely from employer tax and social insurance contributions, have hindered the creation of jobs. "The prospect of relief under a red/green government is not good," he said.
Still, Mr. Schroeder's central promise is to create jobs. His designated minister of labor and social affairs, Walter Riester, sees an alliance with employers as the key to reaching that goal. Mr. Riester earned the respect of employers in 1990, when, as deputy chairman of executive management of IG Metall, the German metalworkers union, he negotiated a compromise that gradually introduced a 35-hour work week and reduced wage demands, thereby creating 300,000 jobs.
Employers see Mr. Riester as a key figure in coordinating tax and social policy with job creation plans.
Creating jobs is also a priority of the Green Party, but the possible coalition would test that party's ability to curb some of its more extreme views, including hefty tax hikes for the environment and the halt of key industries such as biotechnology, nuclear energy, and ultra-high-speed train travel.
Whatever the outcome of coalition talks, Mr. Schroeder has pledged to unravel past social security legislation during his first 100 days in office, including the so-called Rentenreform, which the Kohl government pushed through last October to slash German retirement benefits by 6% within the next 30 years. A reversal of that reform would cost employers more than 15 billion deutsche marks ($8.95 billion), raising total employer and employee retirement contributions to more than 30% of wages from the current 20.3%.
Other far-reaching reversals are planned, including a reinstatement of cuts in sick pay benefits and changes to job protection rules. Last year, employers lauded the Kohl government for reducing sick pay benefits to employees. In 1996, the Kohl government changed the conditions under which employers could lay off employees, making it possible for smaller companies to avoid paying termination bonuses.
Employers are voicing concerns that an SPD/Green government also will go further and faster than the Kohl government did to change Germany's legal system. Germany has some of the world's most stringent environmental protection laws, but they currently are without teeth, largely due to employer cost objections. "A SPD/Green government would likely move quickly to enact enforcement ordinances," said Klaus-Wolfgang Schulze-Weslarn, risk manager for the Dusseldorf, Germany-based consumer goods manufacturer Henkel A.G. "Companies would be forced to accept new liabilities and costs."
In addition, Mr. Schulze-Weslarn fears that an SPD/Green government will boost court awards for pain and suffering. "It is likely they would, with terrible result for companies like ours." Such a change to Germany's legal system would bring it nearer to the punitive and pain and suffering damages that plague American companies, said Mr. Schulze-Weslarn.
Still, Mr. Schulze-Weslarn takes some comfort in Germany's enormous fiscal restraints and the pressure to create jobs, which, in his view, will hinder any drastic measures.
"Mr. Schroeder has often said he's a car-industry man," he said, referring to the chancellor-elect's position on the board of directors of German car giant Volkswagen. "That's a good sign. I just hope he has the strength in his own party and in a coalition to be a car-industry man.'