The vote was an unexpected victory for the government of Chancellor Gerhard Schröder of the Social Democratic Party. The estimated tax breaks of nearly $30 billion would far exceed the $6 billion in lower income taxes the ruling coalition of Social Democrats and Greens promised when it won the 1998 elections.

In the days leading up to the vote in the upper house of parliament, the Christian Democratic Union (CDU) and its sister party, the Bavaria-based Christian Social Union (CSU), threatened to block the tax bill. Seeking to score points against the Social Democrats, they argued that it failed to provide enough relief to small and medium-sized businesses. But the ruling coalition won a resounding victory over the conservative opposition.

"The term 'German disease' now belongs to the past," Schröder declared triumphantly. Big-business commentators use that phrase to describe the German bosses' slow progress in undermining social gains won by working people over the decades, which to them is an obstacle to catching up to their capitalist rivals' competitive edge.

Share prices in Germany's biggest commercial banks and insurance companies soared after the vote.  
 
Corporate taxes lowered
Under the new law, corporate taxes will be lowered from 40 percent to 25 percent as of January 2001. A year later capital gains tax on sales of big corporate cross shareholdings will be abolished. The latter provision clears the way for corporations to sell subsidiaries or shares in other companies without paying taxes on their profits; they were previously subject to a 58 percent capital gains tax.

The largest holders of stakes in Germany's industrial companies are the banks and insurance companies, which provided capital through cross shareholdings instead of cash on loans when German industry was rebuilt after World War II. Deutsche Bank, for example, holds large stakes in the automaker Daimler Chrysler, the building material group Heidelberger Zement, and Metallgesellschaft.

The measure is expected to accelerate the kind of corporate mergers and downsizing--and the accompanying layoffs and attacks on job conditions--seen in the United States and United Kingdom in the 1990s.

To buy the votes of some of the opposition CDU politicians, the Social Democrats offered further tax breaks--lowering the top income tax rate to 42 percent, from 51 percent, and passing a $900 million package to extend some of the big companies' tax advantages to the millions of small businessmen in Germany who are part of the CDU's electoral base.

The CDU's divided vote has caused a further crisis in that party, which has not recovered from the financial scandals that plagued the party last year.

The German rulers have been more successful this year than their rivals in Europe in holding down wages. Several major unions in Germany have settled for low wage increases.

The chemical workers union set the tone by signing a contract with only 2.2 percent in wage increases. The metalworkers union then accepted an agreement in the state of North Rhine--Westphalia with raises of only 3 percent this year and 2.1 percent next year.

In comparison, wage increases won in Norway and Finland through strikes are higher than those in Germany today.

In another setback, wage negotiations by the IG Metall union are no longer carried out nationwide but rather in a given region, and then a pattern agreement is set in the other regions.

The next step in the German govern-ment's offensive against labor is over pension cuts. As the International Herald Tribune put it, Schröder's success in getting the tax cuts approved clears the way for the government "to tackle the more explosive issue of pension reform this autumn."

Retirement pensions are currently 70 percent of wages, and the government has declared its intention to lower them considerably. To "cover" the gap created by smaller pensions, the government proposes that workers buy their own private retirement accounts mainly by offering them tax incentives. This would be a move toward gutting pensions as a social entitlement of the entire working class and instead forcing working people to fend for themselves with individual retirement accounts.

Although these moves allow the German rulers to begin to catch up with their U.S. rivals, they still remain far behind on "labor flexibility"--their code word for giving bosses a freer hand in hiring and firing workers as well as extending the length of the workday.

The recent steps in Germany will now put pressure on other governments in the euro zone, such as France and Italy, to take similar measures attacking labor.

Carl-Erik Isacsson is a member of the metalworkers union in Södertälje, Sweden.