Payroll bailouts in Germany


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Submitted by lambert on Wed, 09/09/2009 - 8:29am

The Globe and Mail:

While other countries were bailing out major companies by purchasing their shares and debt or taking ownership stakes, the German government took a different tack this year, bailing out payrolls instead, in order to keep layoffs and large-scale unemployment at bay and stave off the personal bankruptcies and home foreclosures that would result.

The result has been a political dividend for Ms. Merkel, whose ruling Christian Democrats face a Sept. 27 national election. In 2005, she was swept to office after a sharp rise in unemployment levels forced then-chancellor Gerhard Schroeder, a Social Democrat, to call an election.

This time around, she can boast that unemployment has held steady for two straight months, at 7.7 per cent, below the Eurozone average of 9.5 per cent. Without the kurzarbeit, Germany would have seen unemployment rise.

It has also turned the attention of world governments to Germany, where some forecasters believe the economy is recovering faster than among its neighbouring countries. If growth can resume next year, Ms. Merkel's payroll-boosting scheme will have paid off, saving the country from the worst effects of the downturn.

Hey, remember when you thought the Democrats were on your side? Good times.

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