Minimum wage on way for Germany with Merkel set to agree compromise

Chancellor Merkel will compromise on pay issue to pave way for coalition, but will insist on her own 'red line' demand of no tax rises

PUBLISHED : Friday, 22 November, 2013, 3:39am
UPDATED : Friday, 22 November, 2013, 4:50pm


Germany is set to introduce a national minimum wage, Chancellor Angela Merkel said yesterday, giving in to a core demand of the centre-left party with which she hopes to form a coalition government this year.

The concession was cheered by France, which has - along with the United States and the IMF - urged Europe's biggest economy to boost domestic demand and restore the lopsided trade balance of the export powerhouse.

"This is a signal ... of an approach that may be more co-operative within European economic policies," said French Finance Minister Pierre Moscovici, reiterating the need for a euro zone "rebalancing".

Merkel - who has argued that a minimum wage will hurt businesses and force them to lay off workers - said she would have to give in on the issue as a compromise in the ongoing coalition talks with the Social Democratic Party (SPD).

"The Social Democrats will not conclude negotiations without a universal legal minimum wage," she said in Berlin.

Merkel said she and her Christian Democratic Union (CDU) would "try everything to prevent the loss of jobs through this measure" and insisted that in return, her party would insist on its own "red line" demand of no tax rises.

She argued that fiscal discipline and balanced budgets help maintain investor confidence and global competitiveness and added that "Europe's problem is that we've promised almost everything so far and have kept very little of it". Merkel won September elections, but fell just short of a governing majority, forcing her CDU and its Bavarian partners the CSU to enter into tough coalition talks with the SPD, which both sides aim to conclude next week.

In the talks, SPD chief Sigmar Gabriel, Merkel's likely future vice-chancellor, has insisted on the introduction of a nationwide minimum wage of €8.50 (HK$89) per hour to help Germany's growing army of working poor.

Germany has a jobless rate of just 6.9 per cent. But, according to the DIW economic institute, 5.6 million Germans, or 17 per cent of the workforce, now earn less than €8.50 an hour, especially low-skilled and part-time workers.

The SPD has promised to put any coalition deal up for a vote to its sceptical party base, many of whom do not want their blue-collar party to govern in Merkel's shadow, but whose consent would be needed.

Merkel's party favours separate pay deals by industrial sector and region, arguing a national minimum wage would harm many small and medium-sized businesses and could force them to lay off workers.

"The fixed minimum wage ruined East Germany," said the state premier of eastern Saxony-Anhalt, Reiner Haseloff, referring to the former communist government. "We must not make the same mistake."

Currently, a patchwork of pay deals has set minimum wages for a dozen industrial and service sectors, including cleaners, electricians and security guards.

Merkel urged compromises on both sides to forge a coalition government before Christmas.

"I, too, will have to consent to measures I do not innately agree with," she said, pointing to the minimum wage as an example.

She said a grand coalition was "not the heart's desire of politicians", but had resulted from the election outcome.

She said: "The voters have neither given an absolute majority to the business wing of the CDU, nor the left wing of the SPD. Only both of us together will have the ability to govern."