Labor Clenches Its Fist

Europe's unions are rallying to block reform

It's a fine spring afternoon in Brescia, an industrial city an hour by train from Milan. That is, when the trains are running. On Apr. 13, though, one train after another disappeared without explanation from the electronic display board at Brescia's main station. Finally, word circulated: Transport workers had walked off the job. Sighing and muttering, travelers left the platforms to wait out the strike or, if they could afford it, flag a taxi.

Of course, Europe's unions have long been adept at the one-day strike. But industrial actions are multiplying with unusual rapidity across Europe this spring. And disgruntled workers are after more than just better pay and benefits. The labor unions are mobilizing to derail government attempts to trim the welfare state in Europe's core countries. In a taste of things to come, French unions crippled public transit and closed schools in Paris and other cities on Apr. 3 to protest planned cuts in pension benefits for government workers. In Italy, unions gathered enough signatures to force a national referendum on Prime Minister Silvio Berlusconi's proposals to loosen worker protections. In Germany, union leaders are vowing to block similar proposals by Chancellor Gerhard Schröder. "We're in favor of reform but not if it means dismantling the social welfare system," warns Ursula Engelen-Kefer, vice-president of the German Federation of Unions, the main umbrella group for German labor.

For unions, this is a crucial test of their power. Rising unemployment and growing budget deficits are forcing European governments to make changes that will ultimately help the economy but cause short-term pain. Even friends of labor such as Schröder, a Social Democrat, are backing cuts in unemployment benefits and rollbacks in worker protections. Unions also feel under siege by the European Union as it presses for deregulation and competition. Dock workers in nine EU countries staged protests in March over planned EU rules to break up port monopolies and let nonunion workers handle cargo. Unions, which have seen membership decline for years, are determined to defend their privileges -- while portraying themselves as champions of the common man against runaway capitalism.

If history is any guide, unions stand a good chance of blocking change. No French politician can forget the last time a government tried to reform the tottering pension system. In 1995, unions organized nationwide strikes that killed the initiative and ultimately led to the fall of the government. Most analysts doubt that Schröder can withstand union pressure, especially when three-quarters of the Social Democrat members of parliament are card-carrying unionists. "The reforms, which were already weak, will be even weaker," predicts Horst-Udo Niedenhoff, who follows union politics for the Cologne Institute of German Economics. The result could be more years of slow growth and high unemployment. "The failure to reform is costing jobs," says Tito Boeri, a professor at Milan's Bocconi University.

The astonishing thing about the unions' clout is that they still have so much of it. Union membership has declined dramatically in the past decade as young people choose not to join and companies eliminate factory jobs by automating or moving production overseas. The German Federation of Unions, which accounts for 84% of the nation's unionized workers, has lost a third of its members since 1991. But it still has 7.7 million people. In France, union membership is 8% of the workforce, the lowest in the EU. If anything, the membership decline has heightened the rhetoric as labor leaders try to appeal to the remaining true believers.

A case in point is Jürgen Peters, president-elect of the auto- and metal-workers union, IG Metall. Business was dismayed when Peters, whose mustache and goatee invite comparisons to Vladimir Lenin, was chosen in April over a more moderate rival to succeed union President Klaus Zwickel, who will retire in October. Peters is viewed as the chief firebrand at IG Metall, Germany's second-largest union, with 2.6 million members. "We need social regulations to make sure that the laws of the market don't overwhelm the people," he told members recently.

Moreover, labor influence is institutionalized in Germany. By law, workers hold half the seats on corporate supervisory boards, whose main function is to hire and fire managers. And it's a simple matter for German employees to form a company-level workers' council with a legal right to be consulted on issues that affect working conditions. Defenders of the system point out that major labor strife is rare in Germany. General strikes that shut down the country are unheard of -- but German unions have other means. Some are tacitly supporting an effort by left-wing representatives in Parliament to poll members of Schröder's party on his reforms. Rank and file Social Democrats are generally to the left of Schröder, so the internal referendum could force him to drop his reform drive.

French unions, by contrast, may not have the clout to block reform efforts by the center-right government. Polls show that more than two-thirds of private-sector workers agree with the government's plan to scale back government workers' more-generous pension schemes. France's biggest union, the

Confédération Française Démocratique du Travail (CFDT), draws more than half its members from the private sector and did not participate in the Apr. 3 strike. The CFDT is calling for a one-day protest in May: It is not satisfied with some elements of the government's pension proposal. More radical unions dominated by public employees are calling for an extended nationwide strike, but they probably lack the strength to make good on their threat, according to Guy Groux, a union expert at the Center for the Study of French Political Life. "The government is in a relatively comfortable position," he says.

Indeed, hard-line union tactics could backfire. If unions failed to mobilize enough people, they could expose their own sagging prestige among the public at large. That's a real risk. Union leaders finished almost at the bottom in a recent survey by the Allensbacher Institute of Public Opinion Research of how Germans view 18 professions. French polls show wide support for proposed pension reforms. "There's more confidence in the government than in the unions," says Sandrine Ghiotto, a researcher at pollster TNS Sofres. Long term, there's little question that unions are losing power. For the time being, though, they may have enough clout to stop reform in its tracks.

By Jack Ewing in Brescia, Italy, with Carol Matlack in Paris and Eric Sylvers in Milan

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