Germany picture

The German trarif negotiations are underway with unions.

According to Frankfurter Allgemeine Zeitung:

The German unions: IG Metall (metal workers) demands 6½ % higher wages, IG BCE (chemical workers) and the bank employees 6%. The employers have offered 3%.

What is important in this is that the metal workers is the largest union – with the chemical workers a close second (and chemical industry like Bayer AG (PINK:BAYRY) is very large in Germany both inorganic chemistry and pharmaceuticals) and we are talking close to real wage increases due to the German horror of inflation. The unions are prepared to fight.

Now understanding the German economy really needs an understanding of Ludwig Erhard – if you don’t – you can’t have a qualified opinion – it is as simple as that. After WW2 the right of center Conservatives forged an alliance between the employers and unions:

1)      The employers would get no trade barrier protection on the other hand there would be modest pay raises.

2)      The workers should work harder and increase productivity before they could get a pay rise, the major part of the improvement of living standard would come from lower cost of living – above everything – food. It of course meant all but killing off the German agriculture – and so what?

That was the whole idea behind the D-mark: Why help your exports if it is overpriced junk? Price is not the determining factor for the discerning consumer or business – it is what you get for your money. So the exchange rate for the D-mark went up and up – never shot up; but knew only one way.

The union leader Berthold Huber underlines his demands with the following message:

“We want, simply told, that the workers get their share of the productivity gains – and the employer don’t”.

Interestingly enough the reaction from the Conservative Minister of Finance Wolfgang Schäuble understands very well – the workers that is:

“It is OK, if wages and salaries here in Germany grow more than in all other EU countries.”

I know that for quite a few around the world with no knowledge of Germany this will be totally incomprehensible. But the Germans actually seem to thrive on it. They have traditionally the best educated and trained workforce – and the most disciplined.

Schäuble enlarges: “Don’t overdo it!”

The point for Schäuble is that of course the Germans shall make more money than the others – they work harder and better, and as the other countries won’t cut their salaries and wages to a more appropriate level the German must grow disproportionally. He indubitably has a point: Look where it got Spain, Italy and Greece when they had it their way!