Germany Sees Youth 'Revolution' If Welfare Model Scrapped; German Economy is Strong and Unemployment Low Compared to Other Countries in the EU

Europe must urgently tackle youth unemployment, the French, German and Italian governments said May 28, 2013, urging action to rescue an entire generation who fear they will not find jobs. Some 7.5 million Europeans aged 15-24 are neither in employment nor in education or training, according to EU data. Youth unemployment in the EU stood at 23.6 percent in January, more than twice as high as the adult rate.

Germany sees "revolution" if welfare model scrapped

May 28, 2013

Reuters - German Finance Minister Wolfgang Schaeuble warned on Tuesday that failure to win the battle against youth unemployment could tear Europe apart, while abandoning the continent's welfare model in favour of tougher U.S. standards would cause "revolution".

Germany, along with France and Italy, backed urgent action to rescue a generation of young Europeans who fear they will not find jobs, with youth unemployment in the EU standing at nearly one in four, more than twice the adult rate.

"We need to be more successful in our fight against youth unemployment, otherwise we will lose the battle for Europe's unity," Schaeuble said.

While Germany insists on the importance of budget consolidation, Schaeuble spoke of the need to preserve Europe's welfare model.

If U.S. welfare standards were introduced in Europe, "we would have revolution, not tomorrow, but on the very same day," Schaeuble told a conference in Paris.

"We have to rescue an entire generation of young people who are scared. We have the best-educated generation and we are putting them on hold. This is not acceptable," Italian Labour minister Enrico Giovannini said.

Germany in particular, weary of a backlash as many in crisis-hit European countries blame it for austerity, has over the past weeks taken steps to tackle unemployment, striking bilateral deals with Spain and Portugal.

German ministers told the conference that, to help young people find jobs, Europe must continue on the path of structural reforms to boost its competitiveness as well as make good use of available EU funds, including 6 billion euros that leaders have set aside for youth employment for 2014-20.

While all agreed on the urgency needed to tackle youth unemployment, ministers offered no concrete plans, insisting Europe must be pragmatic and work on various strands.

Schaeuble said this was why Germany had also decided to strike deals with countries such as Spain and Greece.

"Let's be honest, there is no quick fix, there is no grand plan," said Werner Hoyer, head the European Investment Bank.

Together with ministers, he said policies aimed at boosting youth employment must focus on small and medium-sized enterprises as they are the main entry point to the labour market for most.

More than half of Spain's under 25-year-olds are jobless, as are nearly 40 percent in Portugal. In Greece, youth unemployment shot to a record 64 percent in February.

In March 2013, the lowest youth unemployment rates were in Germany and Austria, both below 8 percent, highlighting the wide disparities within the EU.

The youth employment crisis will be a central theme of a June EU leaders' summit, and German Chancellor Angela Merkel has invited EU labour ministers to a youth unemployment conference in Berlin on July 3.

Following up on an idea aired earlier this month, French President Francois Hollande urged the euro zone to work towards a joint economic government with its own budget which could take on specific projects including tackling youth unemployment.

VW agrees hefty pay deal for German workers

May 28, 2013

Reuters - Volkswagen granted its German factory workers an inflation-busting pay rise on Tuesday, the latest hefty wage hike in Germany as union demands meet support from politicians seeking both to woo local voters and underpin the wider EU.

Germany faces federal elections in September which have emboldened unions to press for salary increases popular with the public. But Berlin is also hoping the round of salary increases can encourage Germans to spend more on goods and services from weaker euro zone economies, evening out imbalances and boosting the bloc as a whole, after the International Monetary Fund pressed the German government to act.

VW's pay deal - which lifts wages 3.4 percent from September, then by another 2.2 percent from July 2014 - matches an agreement negotiated earlier this month by the IG Metall union for Germany's 3.7 million engineering and metal workers. Inflation is currently running at just 1.2 percent.

"This and other similar wage deals will encourage Germans to spend more, supporting German economic growth but also helping euro zone rebalancing," said Christian Schulz, an economist at Berenberg Bank.

By increasing labour unit costs the deal at VW - Europe's largest carmaker - and others will reduce German competitiveness and level the playing field with countries still struggling to fire up their economies following the debt crisis.

Private consumption almost exclusively drove German growth in the first quarter, and wage hikes together with low unemployment are likely to boost it further.

VW had urged staff to settle for a "moderate" pay increase as a prolonged global slump in car sales hurts sales and profits.

"We're pushing the envelope of what's feasible, given the difficult market situation in Europe and tough international competition," VW human resources chief Horst Neumann said in a statement on the pay deal, which will apply to 97,000 workers at its six western German plants and 5,000 employees at the financial services division.

Deliveries of VW's main namesake brand tumbled 10.9 percent in the German home market between January and April and fell 7.9 percent across austerity-strapped western European countries. First-quarter operating profit at the German multi-brand group plunged by a quarter to 2.34 billion euros (2 billion pounds).

The new wage accord also includes a one-time contribution of 300 euros to each worker's corporate pension plan, the company said. Apprentices will be paid 27 euros per month towards their pension plans under the 20-month deal slated to expire on February 28, 2015.