(Recasts, combining with industry comments)
By Madeline Chambers
BERLIN Nov 20 Germany risks becoming
uncompetitive and losing business if it undermines labour and
welfare reforms and fails to implement new ones, an industry
body and its central bank warned politicians negotiating a new
government on Wednesday.
Chancellor Angela Merkel's conservatives are in talks with
the Social Democrats (SPD) on forming a left-right coalition
next month, but agreements reached so far on individual policies
point to little in the way of deep reform.
The parties have agreed on introducing a minimum wage, a key
demand of the SPD, higher spending on infrastructure, education
and research plus changes to the incentives system for green
energy to curb rising power prices.
European Central Bank governing council member Jens
Weidmann, also head of the Bundesbank, warned against undoing
reforms that had improved competitiveness in Europe's biggest
economy in the last decade.
He told Die Zeit weekly that Merkel and her prospective
centre-left partners wanted to equip Germany for future
"But that should not mean rowing back on reforms that helped
us so decisively when we were still seen as the 'sick man of
Europe'," he said in a preview of the interview.
"Above all, Germany must invest in education, make the
social security system fit for the future and ease access to the
labour market," he said, adding infrastructure investment was
also needed but not at the expense of budget consolidation.
The BDI industry association attacked planned reforms to
incentives for renewable energy. The parties have said they
would change the law to cut 20 billion euros a year of renewable
surcharges which are added to consumers' power bills to fund the
shift to green energy and away from nuclear.
But BDI President Ulrich Grillo said: "That's too little. I
say it lacks courage."
Industry has long complained subsidies are too generous and
have pushed up energy prices, threatening firms' ability to
compete especially with the United States where power prices are
lower due in part to a boom in shale gas.
The BDI and some firms including chemicals giant BASF
have warned companies may have to move abroad if
there is not a major reform.
"The future of Germany as a location for industrial
companies is at stake," said Grillo in a statement, saying it
concerned 900,000 jobs.
He accused politicians of failing to come up with a strategy
to tackle energy costs and said raising targets for green energy
was "unrealistic" and "unaffordable".
He also insisted that exemptions from the renewable energy
surcharge be kept for energy-intensive industry. That, however,
seems unlikely as the prospective coalition partners have agreed
to scale back exemptions, partly due to pressure from Brussels.
A group of industry bodies including exporters and banks
also warned against hidden tax rises, saying in a statement this
would be "a head-on attack on the competitiveness of Germany".
Proposals to simplify tax and make the system fairer could
hit firms, they said, citing changes to what companies can
deduct from tax and limiting allowances for losses.
With Merkel rejecting any tax hikes, the SPD has dropped a
campaign pledge of higher taxes on the rich but says funding
must be found for infrastructure, education and research.
Parties have agreed an independent panel should coordinate
the introduction of a minimum wage though it is unclear whether
the level will be 8.50 euros per hour, as demanded by the SPD.
Economists and business oppose plans for a minimum wage and
the Commissioner for former East German states warned it could
endanger jobs there, as a quarter of workers earned under 8.50,
compared to 12 percent in western states.
A further factor complicating the negotiations between
Merkel and the SPD is pressure from abroad for Germany to
rebalance its economy.
The European Commission is investigating Germany's high
current account surplus, and its euro zone neighbours argue that
reducing the gap - by cutting its reliance on the exports that
have driven its economic recovery and encouraging higher
consumer spending - would help them grow faster.
(Writing by Madeline Chambers; Editing by Stephen Brown, John