Wall Street investment firm Goldman Sachs points in particular to the substantial transfers of funds eastward in wage increases and massive public spending following the 1990 reunification as the source of the country’s problems, reports the New York Times. The recently elected government of Gerhard Schröder has explicitly targeted such "subsidies," which are a product of the ongoing resistance by workers across Germany to attempts to tear up social benefits in the name of German competitiveness and capitalist profits.

In an important example of such resistance, construction workers organized by the IG Bau union organized a strike this year in support of their demand for an increase in the minimum wage in the east--a step intended to offset the effects of the higher unemployment there.

Much of eastern Germany--where capitalist property relations were dismantled in the years following World War II--is a swath of vacant factories. All of the 30 largest enterprises that were operating in the region before 1990 have been shut down. These combines had employed roughly 1 million people.

The Goldman Sachs report stated that despite massive transfers of funds from the West to the East, which averaged some 4 percent of the total national income over the past dozen years, joblessness in the East still averages nearly 18 percent--compared with the national average of 10 percent--and wages have remained depressed since 1996.

Surveys conducted by the European Commission’s Industrial Relations Observatory show "1.4 million jobless in eastern Germany compared with 76,000 listed job vacancies." Across Germany approximately 1 million job openings contrast to an official unemployment level of 4 million.

In order to maintain social stability, Germany’s imperialist government, in the years following reunification, poured some $70 billion a year in subsidies to finance unemployment insurance and other social benefits in the eastern half of the country. Since 1990 the government has spent some $700 billion, mainly in social transfer payments to the region.

Such transfers register the fact that, despite political reunification, Germany’s capitalist rulers have not been able to dismantle the system of social insurance and related gains--health care, unemployment compensation, pensions, vacations--that the eastern working class won through struggles in the decades following World War II. Social relations forged over those decades have proven difficult to demolish.

The coverage in the capitalist media frequently drips resentment about this impasse. "Germany is still struggling with the burden of absorbing east Germany’s clapped-out economy," reports the Guardian. The British daily noted that the German capitalists face labor costs that are 40 percent higher than their rivals in France and 60 percent higher than their Italian competitors.  
 
Government proposes subsidy cut
In a move toward addressing this drain on profits, the Social Democrat-Green coalition government has proposed a cut in the transfers under the name of a "solidarity pact." Under its provisions subsidies from 2005 to 2019 would amount to $157 billion--an 85 percent yearly cut from present levels.

"We have a vital interest that [the East] doesn’t remain a subsidized area in the long term," said Rolf Schwanitz,, Chancellor Gerhard Schröder’s special representative for the eastern states.

Meanwhile, the German parliament has met to discuss drafting laws aimed at implementing the recommendations of the Hartz commission on unemployment and "labor market reforms." Commission members have claimed that their proposals would reduce official levels of unemployment by half

within three years. Official joblessness has hovered at around 4 million for four consecutive months.

During his election campaign Schröder appointed Volkswagen personnel director Peter Hartz to head the commission. Among its proposals, the commission recommended the establishment of "personnel service agencies"--temp agencies--that would employ anyone who had been unemployed for six months.

Workers hired by the agencies would be obliged to take the short-term work they were given or have their unemployment benefits docked. Every jobless person would be expected to accept a lower wage than before or face a cut in benefits. Single workers would be required to move anywhere in the country for a job or face similar deductions. The plan would force workers to report to "job centers" or face unemployment payment deductions for every day they delay.

The Schröder government has set up a labor and economics "super-ministry" charged with implementing the commission’s labor market "reforms." The ministry is also promoting cuts to social security benefits, reductions in job security for older workers, the creation of a "low wage sector" of the workforce, and measures to make it easier for bosses to fire workers.

Meanwhile, the head of the Confederation of German Trade Unions has warned of "a winter of labor unrest over health service and public sector pay," Reuters reported. The German Medical Association has called on health-care workers to protest planned cuts in health spending that have been backed by Schröder and Health and Social Affairs Minister Ulla Schmidt.  
 
 
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