Germany. It’s those people, all over again

Slogans that helped to topple East German communism are now being used to defend an exceptionally generous welfare system

FIFTEEN years ago, the burghers of this medieval city inspired the world with their clarion calls, heard at protest meetings every Monday, against East German communism: “We are the people”, or still more powerfully, “We are one people ” - -a demand for reunification which was satisfied sooner than anyone expected.

Recently the Monday rallies have returned to Magdeburg's historic streets, as well as to Leipzig and half a dozen other eastern German cities. Old slogans are being revived as a protest against the harshness of capitalism - and in particular against a law that will reduce benefits for the long-term unemployed.

History never repeats itself exactly. But on August 9th, when more than 12,000 protesters gathered in front of Magdeburg's Gothic cathedral - having numbered 600, and then 6,000, on the preceding two Mondays - there were faint echoes of the anti-communist rallies. It was a peaceful crowd of all ages. They have vowed to return each Monday until the government abandons the dreaded “Hartz IV” law, the fourth piece of legislation implementing reform proposals from a commission led by Peter Hartz, personnel director at Volkswagen.

“People don't care whether the system they live in is called socialism or capitalism. They want a life - and having a job is part of it,” said Andreas Ehrholdt, a protester who has not worked for a decade.

Do these new demonstrations signal serious unrest? If so, could Chancellor Gerhard Schroder's broader set of reforms, Agenda 2010, be rolled back? Politicians from both government and opposition are getting nervous. Although most supported the passage of Hartz IV late last year, many are now stepping back - especially those who face the voters soon. Georg Milbradt, the conservative premier of the state of Saxony, where elections are due on September 19th, has suggested postponing implementation of the law, now due to come into force in January.

If people like Mr Milbradt feel wrong-footed, it is because they failed to see that the law, though not radical by world standards, amounts to a big about-face for Germany and its welfare system. Over the years this has become a giant insurance policy, designed to cushion living standards. It has proved costly and counter-productive: a large chunk of the unemployment rate reflects the fact that the jobless have little reason to return to work.

Even compared with those in other generous countries, out-of-work Germans are well protected. People who lose their jobs get unemployment benefit of 60% of their previous earnings (or 67% if they have children) for up to 32 months. After that, payments drop to between 53% and 57%, but have no time limit. By this stage, payments are known as Arbeitslosenhilfe, or unemployment aid. Add in other perks, like family and housing benefits, and it is easy to see why workers with few skills - making up over half the unemployed - eschew badly paid jobs.

To change this, Hartz IV will shorten the period of unemployment benefit to 12 months (or 18 months for those over 55) and do away with the second phase of unemployment aid. Instead, the long-term unemployed will receive a flat-rate benefit, means-tested and paid only to those who seek work seriously. On average, benefits for single people living in western Germany will be 345 ($422) a month; for those in the east, the level will be 331 plus rent and heating allowances.

The Hartz reforms have been presented as a way to “support the jobless” in their search for work. Another Hartz law aims to turn the Federal Labour Office, Germany's largest bureaucracy, into a customer-friendly employment agency.

While many analysts say the reforms are too cautious, they will be quite painful - especially in the east, where unemployment is 18.5%, versus 8.5% in the west. Yet if people are angry, it is because the government has failed to inform them, and the tabloid press is spreading half-truths. At the Magdeburg rally, protesters plied reporters with questions. Will children's savings be taken into account? (Yes, above a certain threshold, because parents would otherwise move money to their offspring's accounts.) Must we move to a smaller home? (In most cases, no.)

Such questions suggest that the protest rallies, which were attended by about 40,000 last Monday, may fizzle once the government has launched its planned information campaign. But that may underestimate the East Germans, who showed their staying power in 1989.

Then again, a democratic government is harder to destabilise than a sclerotic communist one. The protests will probably have real impact only if they take hold in the west, where the demos have so far been paltry. But a spillover is possible: the western German middle class is feeling nervous about economic decline.

In any case, the political fallout will be felt at the forthcoming elections. The ex-communists have made Hartz IV their main campaign issue, calling it “poverty by law”. Chances are that their party, the Party of Democratic Socialism (PDS), will become the number-two political force in the state of Saxony and possibly number one in Brandenburg, where elections are held the same day. Extreme-right groups will also gain votes. Protests against Hartz IV will also benefit a new left-wing party, being formed by dissident Social Democrats and trade unionists. This week, Oskar Lafontaine, a populist ex-chairman of the ruling Social Democrats, threatened to defect to the new party unless Mr Schroder resigned and Agenda 2010 were scrapped.

The chancellor is unlikely to do his arch-enemy either of these favours, although his government decided on August 11th to bring forward the first payouts of the new benefit, and allow children more savings. In fact, Mr Schroder has reason to be optimistic, despite all the protests and dismal election results. His health-care reform is showing some positive effects. Siemens, DaimlerChrysler and other firms have finally cut deals with trade unions to deregulate labour markets from the bottom up. The public mood is improving, with newspapers saying Germany's situation may not be hopeless after all. Most importantly, growth seems to be coming back, albeit only driven by exports. Even the revival of the PDS and the emergence of a new left-wing party could work to Mr Schroder's benefit - because both developments mean fewer opponents of Agenda 2010 will vote for the right. In Saxony, for instance, the Christian Democrats will probably lose their majority in the legislature and could be forced into a coalition, maybe with the Social Democrats.

In Magdeburg language, today's Germany is not “one people” united against tyranny, but a kaleidoscope of shifting interest-groups - thanks to the democracy that the 1989 protests helped create.

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