Miners' revolt ends in "corporatist" compromise

The German Federal Government's plan to cut subsidies for hard coal recently led to a "revolt" among miners. After more than a year of negotiations on how to finance German hard-coal mining in the future, and one week of angry protests by the miners, the Federal Government, the governments of the states of North Rhine-Westphalia and Saarland, the miners' union, IG Bergbau und Energie, and the two mining companies Ruhrkohle AG and Saarbergwerke AG agreed on a" coal compromise" (Kohlekompromiß). The agreement comprises subsidies of DEM 68 billion up to the year 2005, on condition of a reorganisation of the mining industry.

The revolt of the miners

The cause of the industrial unrest was the announcement by the ruling Conservative-Liberal coalition Government that it was planning to scale back annual subsidies for the - basically west - German hard coal (Steinkohle) industry dramatically. During the ensuing protests, Germany saw a human chain of more than 90 kilometres straight through the Ruhr coal heartland, and sympathy demonstrations from east German brown coal miners. Miners in the Ruhr and the Saar areas went on strike. Tens of thousands of miners took to the streets, occupied pits and town halls, and blocked roads as well as the Bonn headquarters of Chancellor Helmut Kohl's ruling Christian Democratic Party (CDU) and its coalition partner, the Free Democrat Party (FDP). In the days before the compromise, the protests of the rank and file seemed to get out of control of the miners' union, IG Bergbau und Energie (IGBE), and its chair, Hans Berger. For the first time in German post-war history, furious miners even entered the restricted area surrounding government buildings in Bonn where no public meetings or marches may be held. As an "act of solidarity with miners fighting for their existence" the Social Democratic Party (SPD) temporarily boycotted a meeting in which opposition and coalition politicians were discussing the reform of the German tax system. When the miners laid siege to Bonn, Chancellor Kohl temporarily put off talks with the union leaders to avoid having to negotiate under duress.

The economic background

In Germany, the mining industry has never been organised according to market principles. Until 1956, coal was subject to price-maintenance policies with consumer prices far below the market price. Since 1958, the mining industry has been receiving subsidies under different regimes.

The root problem is the price of German hard coal. Today, it costs DEM 280 per tonne to produce German hard coal, as compared to the world market price of about DEM 70-80. This long-standing discrepancy has led the number of miners in the hard-coal heartland of the Saar and Ruhr to fall from 607,000 in 1957 to 85,000 in 1996. Since 1970, government has pumped DEM 170 billion into the mining industry, government subsidies towards the social security system of the miners' guilds (Knappschaftskassen) not included. In 1996, each job in the hard-coal mining industry cost the taxpayer DEM 130,000 in subsidies. The total amount of subsidies was DEM 10.9 billion. According to the Federal Ministry of Economic Affairs, the federal subsidies for German hard-coal mining increased from DEM 0.6 billion in 1970 to DEM 9.8 billion in 1996, while in the same period the number of employees fell from 249,700 to 85,000. The main arguments for subsidising the pits are security of supply, keeping jobs in the Ruhr and the Saar areas which are both suffering from structural change, and the machine-making industries' need of working pits to develop advanced mining technology.

The positions of the actors

Under the Federal Government's plan, Bonn would have cut its hard-coal subsidy from an annual DEM 9 billion to DEM 4 billion by 2005, securing 30,000 of the 85,000 miners' jobs. In addition, the subsidies from the state of North Rhine-Westpahlia should have increased from DEM 1.1 billion today to DEM 1.5 billion by 2005. The discussion of axing subsidies takes on an additionally delicate flavour when considering the necessity of closing the federal budget deficit to meet the Maastricht criteria for joining EU Economic and Monetary Union.

Ruhrkohle AG (RAG) opposed the government plans and argued that five to seven pits would have to be closed by 2000. To avoid redundancies it demanded subsidies for at least the next three years. The hard-coal employers' organisation, Gesamtverband des deutschen Steinkohlebergbaus, saw the Government's plans as representing a nose-dive for the coal industry which would drive unemployment even higher.

The IGBE estimated that the reduced subsidies would lead to the closure of seven of the 19 working hard-coal pits by 2000 and the loss of an estimated 55,000 miners' jobs by 2005, with a further 70,000 jobs threatened in the coal-related and supplier industries in the regions. The position adopted by the IGBE was to achieve subsidies not below DEM 6.5 billion a year, with the objective of preserving at least 45,000 jobs.

The negotiations were complicated by the fact that the Ruhr and Saar coalfields are situated in the Opposition-run states of North Rhine-Westphalia and Saarland. Both states face a thorny and complex dilemma. Both have Social-Democrat governments which, as the political branch of the labour movement as well as for the sake of their electorate, were more or less forced to act in solidarity with the miners. Furthermore, both states are facing structural problems, high rates of unemployment and high budget deficits. Thus, they supported the demands of the miners and tried to avoid further unemployment, without being able to finance the subsidies themselves.

The agreement

On 13 March, the Federal Government, the governments of the states of North Rhine-Westphalia and Saarland, the IGBE, RAG and Saarbergwerke AG agreed on a gradual winding-down of the annual subsidies by 2005 to about 50% of today's amount, as set out in the table below.

Hard-coal subsidies 1996-2005 (in billion DEM)
Federal Government North Rhine-Westphalia Total per year
Total 1997-2005* 58.55 9.61 68.16
1996 9.80 1.10 10.9
1997* 8.05 0.86 8.91
1998* 8.25 1.00 9.25
1999* 7.80 1.00 8.80
2000* 7.50 1.00 8.50
2001* 6.65 1.15 7.80
2002* 6.05 1.15 7.20
2003* 5.35 1.15 6.50
2004* 4.75 1.15 5.90
2005* 4.15 1.15 5.30

Note: * according to the "coal compromise"

Sources: Presse- und Informationsdienst der Bundesregierung, Bundeswirtschaftsministerium, Gesamtverband des deutschen Steinkohlebergbaus

According to the agreement, state subsidies will account for a total of DEM 68.16 billion from 1997 to 2005, with Bonn bearing the lion's share. The agreement includes the conditions that the diversified RAG is obliged: firstly, to take over Saarbergwerke AG for a symbolic price of DEM 1; secondly, to cross-subsidise its coal branch with an annual DEM 200 million from 2001 to 2005; and thirdly, to avoid redundancies. This means that until 2000, one pit will have to be closed each year. According to estimates by the IGBE and RAG, seven or eight of today's 18 pits will have to be shut down by 2005. Subsequently, employment in the mining industry will be reduced from 85,000 to around 37,000.

Commentary

The coal compromise, a corporatist arrangement par excellence, was welcomed by all parties to the agreement. It is seen as an instrument to steer the adjustment process of the mining industry in a socially adequate way while avoiding redundancies - "a solution everybody can live with". However, there are some problems associated with the compromise that should not be ignored:

  • first, there is the taxpayers' heavy burden of more than DEM 68 billion. Successive governments have paid dearly for either an orderly shrinking of the hard coal industry or social peace, depending on the perspective. Even in the hypothetical case of no reductions of employment in hard coal mining, the compromise means subsidies of - on average - more than DEM 800,000 for each of today's 85,000 miners by 2005. At the time of high unemployment, the money could be used more efficiently in supporting the creation of new jobs, eg by wage subsidies;
  • second, this compromise is sending out the wrong signals. The agreement might constitute an expensive precedent for other economic sectors which are facing a structural crisis as well, such as construction, shipbuilding or the east German brown-coal mining industry, where within five years, the number of miners had been reduced from 133,500 to 25,000 without such financial generosity. It might even strengthen the misconception that corporatist decisions could provide a permanent shelter from market forces and the necessity of structural adjustment; and
  • third, the compromise does not include a perspective of what should happen to hard-coal mining after 2005. So, the discussions on the future of coalmining will continue, at the latest in 2005... (Stefan Zagelmeyer, IW)
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