Labour reform agreed at G7

GERMANY and France, both struggling with chronic unemployment, yesterday said they would reform their labour markets but stressed they would not abandon the disadvantaged and risk splitting their societies in the process.

The two allies at the core of the European Union also said efforts to increase employment would not affect their attempts to cut public deficits and qualify for the single European currency.

"In those European countries where high indirect labour costs have contributed to unemployment among the unskilled, social charges bearing on unskilled labour should be lowered where appropriate," said a final statement from a Group of Seven (G7) meeting of economy and labour ministers on employment.

The reference was to Germany and France, which have high taxes and supplementary wage costs which both say have contributed to unemployment.

"We have to get supplementary wage costs down. We have to reform our social welfare system and reduce taxes and other charges," German economics minister, Mr Ginter Rexrodt, said after the meeting.

Mr Rexrodt said he was pleased that many of the themes in Bonn's recently-announced 50-point Action Plan for Investment and Jobs were echoed in the G7 statement.

German unemployment recently hit a post-war record of 3.97 million, or 10.3 per cent of the workforce. Workers are well paid and entitled to long holidays but taxes are high and working hours highly restricted.

Labour minister, Mr Norbert Blum, acknowledged that some of the country's antiquated working practices needed to be scrapped.

French and German ministers attending the conference stressed the importance of improving education and training so that people were ready to take up new jobs created by a liberalisation of world trade and new technologies.

"We see trade liberalisation as positive but at the same time it's a source of insecurity for many of our citizens who are not harvesting the fruits of it," said French labour minister Mr Jacques Barrot.

French unemployment stands at 11.8 per cent and is likely to rise further.