Germany seeks £22bn in cutbacks

THE Germany Chancellor, Dr Helmut Kohl, has called on Germans to lower their economic expectations as he announced a massive package of spending cuts aimed at trimming 50 billion deutschmarks (£21.7 billion) from the federal budget.

Announcing the measures at the start of a four hour Bundestag debate, Dr Kohl said Germans must be prepared to sacrifice many of the social benefits they were accustomed to if the country was to, remain economically competitive.

"These unavoidable corrections are the only way to strengthen our economy, to make new jobs possible and to create a good basis for the future of our social welfare system," he said.

Dr Kohl decided to press ahead with the cuts despite the collapse of talks with employers and unions on Tuesday and in the face of loud protests from the opposition Social Democrats.

Pensions and unemployment benefits are to be reduced and the retiring age will rise to 65 for both men and women. German women retire at present at the age of 60 and men work until they are 63.

Workers in firms employing fewer than to people will lose employment protection rights, and sick pay is to be cut by 20 per cent. The package also includes a pay freeze for public sector workers and the postponement of an increase in child benefit.

Dr Kohl claimed that the reforms would help firms to create jobs and thus reduce Germany's record figure of four million unemployed. But the package was criticised as "a plot against work and social justice" by Mr Klaus Zwickel, leader of the metalworkers union IG Metall.

"The plot will strangle economic growth and drive mass unemployment upwards," he said.

The Social Democrat leader Mr Oskar Lafontaine, accused the chancellor of waiting until last month's state elections were safely over before announcing the cuts.

But the tone of yesterday's Bundestag debate was gentle, suggesting that government and opposition may be prepared to compromise to ensure the passage of the package through both houses of parliament.

Employers welcomed the package but the Health Minister, Mr Horst Seehofer, warned that German industry must now take its share of responsibility for Germany's economic future by investing more profits at home.

"If only half of what German firms have made in Germany during the past five years was invested at home we would have many fewer problems," he said.