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Chancellor clamps on collective bargaining parties: Scholz agrees to “historic challenge”.

The “concerted action” has begun. After an initial meeting in the Chancellery, trade unions and employers agree to work with the federal government to find ways out of the looming economic crisis. The description of the situation is drastic.

Prototype: the 1967 Concerted Action

The federal government has a famous model for its approach: the “concerted action” 55 years ago, orchestrated by the social democratic Federal Minister of Economics Karl Schiller. When the economic growth that had lasted for a long time after the Second World War collapsed for the first time, Schiller brought all the relevant actors, and in particular employers and trade unions, to one table. Despite initial resistance, the unions moderated their wage demands. It is disputed whether the boom that began again the following year was a result of this agreement.

Federal Chancellor Olaf Scholz, Federal Economics Minister Robert Habeck, Federal Labor Minister Hubertus Heil and Chancellor Wolfgang Schmidt sat together with trade unions, employers’ associations and experts for two hours. Finally, on Monday afternoon, Scholz was able to announce the desired result: from now on, the organizations of employees and companies want to exchange information regularly with the federal government on how to deal with the looming economic crisis – the “concerted action” based on the historical model has started. “I’m very grateful to everyone for taking up my initiative and supporting it,” said Scholz. And: “It was a good start, I would like to emphasize that.”

In addition to Scholz, the Chairwoman of the German Trade Union Confederation (DGB), Yasmin Fahimi, and Rainer Dulger, President of the Confederation of German Employers’ Associations (BDA), also came to the Chancellery to briefly comment. Questions, however, were not allowed. The Chancellery was obviously very keen to produce a picture of unity. “It is good that we are coming together at this time. It is indeed a period of historic precedent,” said Fahimi. Dulger’s choice of words was particularly drastic: “This meeting today has made a contribution to maintaining social peace.” The employers welcomed Scholz’ initiative, emphasized Dulger. “This country is facing the worst economic and socio-political crisis since reunification.”

Peace on the Wage-Price Spiral Question

As announced, the participants first exchanged views on the nature and severity of the situation. A lot is still unclear: If Vladimir Putin permanently turns off the gas tap in Europe after the regular maintenance of the Nord Stream 1 pipeline, Germany will fight a severe recession in a few weeks. If not, the high energy prices, the effects of the accelerated inflation to date and globally disrupted supply chains will cause more than enough problems – a possible gas supply stop would still be a threat. At the heart of the “Concerted Action” is the question of how the purchasing power of employees can be strengthened without overburdening the many companies that are already under a heavy burden.

After the tone between employers and trade unions had recently sharpened in this tense situation, both parties in the Chancellery approached each other a bit: Fahimi praised that in the discussion about the factors behind the crisis, there was a clear understanding that in the current situation, the discussion about a wage-price spiral is wrong – it is “in fact not given”. Employers had recently warned that high wage settlements could further fuel runaway inflation. But now Dulger confessed: “Wages are currently not an inflation driver.” Instead, he named high energy prices, the lack of raw materials and skilled workers and disrupted supply chains.

Dulger sees the state as having a duty

“The next few weeks will be about developing instruments and finding ways of how we can react to this challenge together,” said Scholz. Government spokesman Steffen Hebestreit had already scheduled concrete results for early autumn in the morning. Then it will also be clearer how difficult the economic situation really is and how full the gas storage tanks will be at the beginning of the heating season.

Employer President Dulger called for “more net from the gross” as a possible crisis instrument, in that politicians ensure that more money stays in the wallet from possible wage increases: employers have therefore proposed “eliminating cold progression,” said Dulger. “Exemption from one-off payments of taxes and social security contributions can also be an option.” The latter had been circulating in the media for a week as the federal government’s preferred approach, but was caught up again by Scholz in his summer interview on Sunday: the chancellor denied that he was even going into the negotiations with any preconceived plans.

Fahimi praises measures

However, it is possible that the broad criticism from the trade unions had also encouraged him to backtrack: the employee representatives had emphatically demanded permanent wage increases instead of one-off payments – presumably all the more resolutely the more they feared an interference in the collective bargaining autonomy by an alleged alliance between employers and the chancellor’s office. On Sunday and Monday, the SPD, which is close to the trade unions through its DNA, and its chancellor were audibly intent on relegating such fears to the realm of fairy tales. What the “concerted action” could produce instead, Scholz did not want or could not reveal. He’s happy “if we leave the beaten path in this great joint dialogue that we’re now having with each other,” he said.

Fahimi, SPD member and former general secretary of the party, reiterated calls for further consumer relief. Although the federal government’s packages of measures “relieved average households by 1,000 euros,” said Fahimi and praised: “That’s a significant sum.” But: “The burden on private households goes well beyond that.” The top trade union leader showed understanding for the situation of the companies and the need to keep an eye on the well-being of the economy. Everything must be done “to prevent a recession”.

Unclear timetable

The fight against cold progression, i.e. the taxation of slight wage increases to compensate for inflation, is the declared goal of Federal Finance Minister Christian Lindner. However, the FDP chairman initially wanted to wait for the biennial report on cold progression, which comes at the end of the year. It’s possible that he doesn’t have that much time. Other topics of the “Concerted Action” are likely to be instruments that ensure consumers and companies a basic supply of electricity and heating. Cushioning other inflation drivers, for example by accelerating the supply of foreign skilled workers, and relieving companies of taxes could also end up on the agenda.

When the group will meet again remained unclear on Monday, as did the content of the timetable. Questions about such details should obviously not disturb the carefully prepared signal that everyone in Germany is now “linking hands” – as the chancellor has been insisting for days – in order to fight the crisis together. The coming days will show whether Scholz has already forged a new truce between the unions and employers.

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