* OECD recommends steps for sustainable growth and social
* Welcomes new minimum wage but criticises pension reforms
* Says wants regional banks and government stakeholdings
(Adds quotes from Economy Minister Gabriel, Gurria)
By Michael Nienaber
BERLIN, May 13 Germany should pursue reforms to
narrow the social divide in employment and pave the way for more
sustainable growth, the Organisation for Economic Co-operation
and Development (OECD) said on Tuesday.
Europe's biggest economy has proved resilient amid global
financial turmoil and the euro zone debt crisis, and German
unemployment stands at post-unification lows even as job losses
mount elsewhere in Europe.
"Germany is doing very well, but our aim is to make sure
that everybody is on board," OECD Secretary General Angel Gurria
said at a news conference with German Economy Minister Sigmar
Gabriel in Berlin.
The OECD's Economic Survey on Germany said the social
mobility of low-earners in the labour market had shrunk, adding:
"While income inequality is lower than in most OECD economies,
the share of low-paying jobs has risen considerably."
The OECD urged Chancellor Angela Merkel's coalition
government to take decisive action in this and other areas and
promote a "more inclusive model of growth" based on good wages,
a fair tax system and equal opportunities in education.
The OECD welcomed the planned phasing-in of a minimum wage
across all sectors but said more needed to be done to give
temporary workers rights equal to those of full-time employees.
Lowering taxes on labour, broadening the tax base by
updating property tax valuations and extending capital gains
taxes on some residential real estate would free up capital to
invest in infrastructure, full-day childcare and better
education for children from low-income families, it said.
"Breaking the link between students' socio-economic
background and their education performance is key to making
economic growth more inclusive," Gurria said, adding that this
was a particularly pressing problem in Germany.
The OECD criticised Germany's pension reform plans, saying
raising pension entitlements and lowering the retirement age for
some employees would make it harder to reduce labour costs
without necessarily alleviating poverty risks among the elderly.
Gabriel welcomed the OECD's recommendations, but defended
plans favoured by his Social Democrats, who share power with
Merkel's conservatives, to lower the retirement age to 63 for
workers who have contributed 45 years to public pension funds.
"This is a question of fairness", he said.
The Paris-based organisation of mostly rich countries also
called for reforms in the financial sector and the reduction of
risks emanating from Germany's regional state-owned banks or
Landesbanken - "including through privatisation".
Many German states oppose this, with private participation
so far only in HSH Nordbank, where the private equity
firm J.C. Flowers holds 9 percent.
Germany should take further steps to ensure banks are
adequately capitalised and that bank debts are included "as
comprehensively as possible in the future bail-in instrument"
when new European Union banking directives are implemented.
The OECD reiterated its advice that Germany should push on
with the privatisation of government stakes in formerly public
companies, such as its roughly 32 percent in Deutsche Telekom
and 21 percent in Deutsche Post.
The Federal Audit Office has also urged the government to
relinquish its stake in Telekom, although the finance ministry
says it has no such plans at present.
(Reporting by Michael Nienaber; Editing by Stephen Brown and