German strikes put unions and politicians at loggerheads

Earlier this week German train drivers began a walkout that has left transport and supply chains in the country in chaos. The six-day strike is one of the longest in its national rail history and eighth walkout in the last 10 months.

A striking problem

It comes at a cost of “several hundreds of millions of euros,” according to The Federation of German Industry (BDI) whose spokesman said the strikes were injecting “poison” into the country’s highly developed economy.

With the rail system down, other industries are affected.

The steel, chemicals and car supply lines are in backlog, while there are even reports of cash points running dry with courier workers in Berlin also striking.

These walkouts have coincided with pilot strikes at Germany’s flagship airline Lufthansa and a high profile two-year wage battle between the Verdi union and online retailer Amazon.

Under strain: working relations

So what is going on?

For years Germany’s economy has been the envy of Europe. So-called “works councils” have been the staple of what has largely been a fruitful relationship between workers and employers.

Under this system, labour representatives receive half of the seats on the supervisory boards of big companies. When management debates big strategic decisions, unions have a say. As a result fractious disputes have usually been resolved without too much hassle. Nowhere was the success of this more celebrated than during the banking crisis of 2008.

The “works council” system allowed the two sides to come together quickly and thrash out a deal that included cuts in working hours, and cuts in pay – across the board. As a result unemployment rose only fractionally.

But in recent years things – as parts of the European and global economy have recovered – things have been changing. Industrial unrest in Germany has been growing and the system once designed as a safeguarding mechanism has been used as a negotiating tool.

The current German structural system is geared to prevent a company from taking radical decisions that may be necessary to preserve competitiveness. So as companies move to try and bring about reforms, they are running into objections, with workers able to mobilise unions quickly.

Hitting back

But all this could be about to change.

Later this year Angela Merkel’s government is expected to pass legislation that will curb the influence of niche unions.

Under a law that comes into force in July, companies will be able to limit wage negotiations to the union with only the biggest group of employees. Courts would be able to rule strikes by smaller unions without bargaining power illegal.

“Striking is a right in Germany. Nevertheless I believe that these strikes are creating a serious burden for many people and many companies,” Ms Merkel said at a news conference this week. “Therefore everything must be done to find a solution.”

Should that not be happen, expect this summer to be when the government finally steps in.