End of the Miracle

By JAMES O. JACKSON BONN

MOUNDS OF GARBAGE IN THE streets, stacks of undelivered mail, trains that did not run on time. This is Germany?

Yes, indeed. For 11 days, Germans got an unaccustomed taste of civic disorder, when garbage collectors, transport workers and other public employees walked off their jobs in the longest and most acrimonious strike since the end of World War II. Streets stank, planes didn't fly, traffic snarled. In the end the workers prevailed, forcing the government of Chancellor Helmut Kohl to surrender to a 5.4% pay raise. It was less than the unions wanted but more than Kohl felt Germany could afford.

He may be right. The decision to boost wages above the current inflation rate of 4.5% is almost certain to set off a new inflationary spiral, raise the federal deficit and slow the flagging economy. Even so, most Germans backed the strike because they were angry -- embittered by the swelling cost of unification, furious over rising taxes and indignant at being asked to bear too big a share of aid to the former communist countries in the East. And the anger will not soon subside. Other unions, in the metal, printing and construction trades, will ride the wave of discontent to demand similar increases to offset tax hikes linked to German unification. They probably will win pay raises too, despite the strenuous objections of industrial leaders who predict falling exports and vanishing jobs as a result.

It all marks the end of the most enduring business-labor armistice in Europe, a social contract that allowed Germany to achieve its postwar miracle of industrial prosperity. Perhaps that compact of mutual benefit can be restored eventually. Nevertheless, the size of the wage hikes resulting from the strike will damp the energy of Europe's economic powerhouse at the , critical moment when it is needed to pull the Continent together. Germany, the "Paymaster of Maastricht," whose Bundesbank anchors the European monetary system that will be unified under that treaty's ambitious integration plans, is certainly headed for deep debt, maybe even into recession.

The winners of the strike -- if it can be said to have winners -- were the 2.3 million members of the Public Services and Transport Workers' union, one of 16 giant labor combines that encompass most of western Germany's work force. The 5.4% wage hike they squeezed out of the government is, ironically, precisely the amount accepted by the union and rejected by the government when an arbitrator recommended it well before the strike began on April 27. The union's chief weapon was its shrewd, tough-talking president, Monika Wulf- Mathies, who brilliantly calibrated the walkouts to demonstrate the union's power without antagonizing the public. No more than 430,000 members stayed off the job at any one time, limiting the strike's damage to levels other citizens could tolerate. Business losses and public inconvenience were held to a minimum. The tactic worked. Popular outrage was aimed at Kohl, not the garbage collectors.

That accorded neatly with Kohl's slide in public esteem. The Chancellor's star has lost much of its luster since the night the Berlin Wall came down. His 10-year-old conservative coalition is unraveling, Germany's four-year economic boom is expiring, and the government faces contentious decisions on vexing social questions of political asylum and health-care costs. The Chancellor is increasingly seen as lacking in leadership. But western Germans are especially disgruntled over the expense of unification and the amount of money the government is transferring to the east: something like $1 trillion will flow from west to east by the end of the century. "The state is taking money out of our pockets," wrote editor Rolf Schmidt-Holtz in the weekly magazine Stern, expressing a widely held western opinion. "People are embittered because they are being deceived. The state has no more reserves; billions are trickling away in the east to no effect."

True, but if wages cannot be kept under control, German children will also end up paying. By giving raises it cannot afford, the German government will be forced to borrow to meet payrolls. That, together with the unavoidable costs of bringing eastern Germany up to western standards, will mean a chronic budget deficit of $100 billion a year or more.

Such spending runs against the grain for Germans brought up in the flinty, pay-as-you-go atmosphere of the postwar recovery. It put Kohl in a bind: he could choose to fight the unions in a long, crippling strike, or he could choose indebtedness. Either choice would hurt him politically, but in the end, he opted to accept a huge debt in the year 2000, when his career will be well over, rather than more chaos now.

In fact, Kohl's government is already vulnerable. Right-wing parties have showed surprising strength in recent state elections. Kohl's Christian Democratic Union and its Bavarian sister party, the Christian Social Union, are at their lowest ebb in popularity since before unification. Their liberal coalition partners, the Free Democrats, are faring even worse: their standing in the polls fell sharply when their leading light, Hans-Dietrich Genscher, announced his resignation as Foreign Minister. Opposition Social Democrats, who enjoy a healthy 41% approval rating, are insisting that they should join Kohl in a "grand coalition" to get the country back under control. Even some conservatives are toying with the idea, although Kohl rejects it. All the party maneuvering could bring down the government.

Almost unheard from in the arguments are the hapless eastern Germans. They were not part of the strike movement, even though they earn on average only 62% as much as their western compatriots -- those easterners, that is, who have any job at all. At least 15% of the east's 9 million workers have no jobs, and another 20% are marking time in programs that disguise the true level of unemployment.

"The western unions refuse to see that anything they get will be swallowed by inflation," says Meinhard Miegel, head of the Institute for Economy and Society, a Bonn think tank. "They will do nobody any good, not even themselves." Kohl has tried, in vain, to tell workers that. "The simple fact is that we cannot live beyond our means in the long term," he said. "Everyone must be aware that everything now pushed through on the wages side beyond a reasonable level is definitely no longer available for investment and jobs."

After years of nonstop improvement, German workers are loath to accept any reduction in their comfortable standard of living. They are the most pampered and protected in the industrial world. The average cost to employ a western German worker -- in pay plus such benefits as comprehensive health insurance | and generous pensions -- is about $23 an hour, compared with $15 for an American and $16 for a Japanese. That is for an average workweek of only 37.5 hours. Annual vacation is six weeks, plus at least 11 holidays a year. Educational subsidies and compulsory national service mean that most young people begin careers only in their late 20s or early 30s, and then retire as young as age 60.

Nor do the unions put much trust in Kohl's words. In 1990, campaigning for election as the Chancellor of one Germany, he promised "blossoming landscapes" in the east by 1994 and insisted that "nobody will be worse off after unification." But two years later the landscape is not blooming, and recovery of the east is likely to take 10 years at least. Kohl said there would be no new taxes, but the government enacted stiff "unity surcharges" on income taxes last year. He promised to control inflation, the economic hobgoblin of postwar Germany, yet it is running higher than 4%. Last week Kohl seemed to misread the public mood, blithely dismissing the labor unrest as "no real crisis."

The bill for unity must be paid. The best way to pay it would be for Germany to remain the industrial powerhouse of Europe, and that means workers willing to sacrifice for unity now as they did for recovery in the past. A robust, expanding economy can absorb the costs; a stricken, shrinking one cannot.

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CAPTION: THE GOOD LIFE