Germany to Slim Welfare State, Toe Austerity Line

Military, students, and workers face harder times ahead

CRUNCH time is fast approaching for Chancellor Helmut Kohl. Heading into an election year, the German leader says sharp cutbacks are needed in the nation's vast social-welfare system.

The German parliament already has begun cutting away at the nation's social safety net, built up over the past five decades.

Last Friday, the Bundesrat, the legislature's upper house, voted to reduce unemployment and child support payments, and scale back job retraining programs. But Mr. Kohl, speaking at his year-end news conference last week, said more cuts were needed. He announced that he is planning ``drastic savings measures,'' but declined to get into specifics. ``We will take a big step forward,'' a somber Kohl said. ``The dissatisfaction will be enough. Why should I reveal all before Christmas.''

If all the planned cuts - to go along with a gasoline tax hike that takes effect Jan. 1 - are fully implemented, the government estimates it could trim $16.4 billion from the nation's budget deficit of around $43 billion.

But in pledging to reduce government spending, Kohl is taking a great political risk. At his news conference, Kohl promised to ``fight for every vote'' in the impending election campaign. He also dismissed speculation that Germany was witnessing ``the twilight of the chancellor.''

Nevertheless, with Germany struggling to dig out of its worst recession since the end of World War II, Kohl is looking vulnerable in the run-up to federal parliamentary elections next October. And further state cutbacks would do little to lift his sagging popularity rating.

Voters are clearly angry with Kohl's governing Christian Democrat-led coalition. In Dec. 5 municipal elections in the eastern German state of Brandenburg, the Christian Democrats garnered fewer votes than the revamped Communist Party.

Though budget cuts may be unpopular, they are needed, says Dennis Phillips, a spokesman for the Frankfurt-based Commerzbank.

``The Santa Claus approach of dispersing funds ... this works only when you have a surplus and a booming economy, which is not the case now in Germany,'' Mr. Phillips said.

``Germany has been living beyond its means,'' he continued. ``The idea of working less hours and making more money is over.''

Two areas coming under government scrutiny are defense and higher education.

On Thursday, a German Defense Ministry spokesman announced that troop levels would be reduced by 35,000 next year, adding that the move would save an estimated $587 million. That means since German reunification in 1990, the military will have shrunk from 560,000 troops to an estimated 350,000 next year.

Kohl also has proposed cuts in study time. Under the current higher education system, which is state-funded, students usually do not leave school until their late 20s, or even early 30s. Kohl wants young people to start working earlier, but the plan is meeting stiff student opposition.

Though the government may see plenty of fat waiting to be cut, it will have to proceed cautiously. Already organized labor leaders are complaining that workers are being squeezed too harshly.

Leaders of Germany's most powerful trade union, IG Metall, warn of worker unrest and strikes in 1994 if employers do not show flexibility on wage-reduction demands.

In contract negotiations, IG Metall has called for up to a 6 percent salary increase for its workers, but has said it would accept less in return for job security. The union holds that wage hikes would have to keep pace with inflation.

Employers feel differently. Citing the poor economy, they are pressing for wage reductions. Metalworkers' union leaders fear that companies will resort to lockouts to get what they want.

A healthy economy would make Kohl's job easier. A German central bank report released last week indicated that the economy is starting to rebound. But, the report added, it is too early to say ``recessionary tendencies have definitely been overcome.''

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