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Painful welfare cuts for booming Germany

Germany is enjoying its strongest economic boom since 1990, but millions of people on welfare benefits face painful cuts over the next four years from the government's austerity package.

BERLIN // Germany is enjoying its strongest economic boom since 1990, but millions of people on welfare benefits face painful cuts over the next four years from the government's €80 billion (Dh409.79bn) austerity package.

The more than 900,000 long-term unemployed, classified as people who have been out of work for more than a year, are about to suffer a range of reductions in their entitlements from next year.

Allowances for heating and pension contributions will go and there will no longer be parental benefits for newborn babies.

The reductions will affect up to 6.5 million people. Trade unions and the opposition centre-left Social Democratic Party (SPD) have accused the chancellor Angela Merkel of "brutal" cutbacks, hitting the weakest in society.

Mrs Merkel's centre-right coalition plans to go ahead with her austerity programme despite the surprisingly strong economic rebound, driven by surging exports especially to China, which is expected to push growth in Europe's largest economy to more than 3 per cent this year.

"The unemployed and families are being forced to pay for half the budget consolidation, while the coalition's clientele of voters is being spared," said the chairman of the SPD Sigmar Gabriel when the cuts were announced in June.

The opposition says Germany does not need to make radical spending cuts because the economic rebound will flush tax revenues into the budget.

Mrs Merkel argues the recovery may be short-lived and the country needs to set an example of fiscal discipline to the highly indebted EU nations such as Greece, Portugal, Spain and Ireland, which have to make far bigger cuts.

Germany's budget deficit, at 3.1 per cent last year, is only just above the EU's 3 per cent ceiling and is dwarfed by the deficits of other leading economies such as France (7.5 per cent) and Britain (11 per cent).

German unemployment, at an adjusted rate of 7.5 per cent last month and falling steadily this year, rose far less during the global crisis than in other countries.

Protests against the austerity programme have been muted in Germany when compared with its EU neighbours. The few strikes that have taken place in recent months have been in defence of pay claims.

Railway employees staged warning strikes last Tuesday and steel workers walked out last month. The steel workers secured a 3.6 per cent pay rise.

Workers in other industries can also expect increases, provided the economy continues to grow.

 

dcrossland@thenational.ae