No escape from job cuts for reform-shy Germans


By Georgina Prodhan

FRANKFURT, Sept 21 (Reuters) - Germans are braced for thousands of job cuts as companies warn they will have to step up the pace of restructuring after an inconclusive general election stymied their hopes for faster labour-market reforms.

Within 24 hours of the polls closing on Sunday, Siemens -- one of the country's biggest employers -- had announced it would axe 2,400 jobs in Germany, with more to follow, adding to anxieties about record high unemployment.

Korea's Samsung Electronics on Wednesday said it would cut 750 television manufacturing jobs at a Berlin plant, just one day after German cement maker HeidelbergCement said it would cut 1,100 jobs in Europe.

And as politicians began haggling over who might form a coalition government after Sunday's unexpectedly close vote failed to produce a clear winner, Germany's overstaffed car industry warned that a prolonged stalemate could cost more jobs.

Bernd Gottschalk, chairman of the VDA auto industry association, said the industry -- which is already cutting thousands of jobs in Germany -- would step up its own cost-cutting efforts if politicians did not do the job for them.

"It's an alarm bell," said Thorsten Polleit, chief economist at Barclay's Capital. "It's a kind of appeal to the general public to make a point about the importance of getting together to steam ahead with reforms and tackle Germany's problems."

DaimlerChrysler's head of research and technology added his voice to the appeals for politicians to quickly unite and push through reforms in high-wage Germany, saying there was no time to lose in the "merciless competitive struggle".

And Volkswagen has said it needs to either slash costs or cut jobs, even though the company has said reports of some 10,000 German job reductions were just speculation.


Germany's conservative Christian Democrats (CDU) saw a clear opinion-poll lead dwindle during the election campaign to the point that Social Democrat (SPD) Chancellor Gerhard Schroeder was able to make their narrow actual victory look like a defeat.

The close-run result means neither major party has enough support to form a coalition with its natural partner, neither the SPD with the Greens nor the CDU with the liberal FDP -- the combination most of the business community had hoped for.

Now, expected corporate tax cuts and a loosening of employment law are likely to be diluted by the influence of one or other of the smaller parties or slowed by an awkward coalition between CDU and SPD.

However, economists say Germany has no choice but to carry on with a reform process started by Schroeder if Germany is to beat competition from lower-cost regions and spark domestic economic growth.

"I think that in general there is a high degree of uncertainty now but it will only be short-lived because any government will have to push through reforms," said Marco Bargel, chief economist at Postbank.

However, more job cuts are to be expected in any case, said Barclays Capital's Polleit.

"I wouldn't be surprised if the prevailing sentiment within certain companies has been dampened by the election outcome, that certain hopes haven't been met. That strongly argues for certain outcomes as far as investment plans are concerned."



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