EU business ‘must redistribute wealth’ By George Parker in Brussels
Published: February 27 2007 20:30 | Last updated: February 27 2007 20:30
European companies must give workers a bigger share of their soaring profit or risk igniting a “crisis in legitimacy” in the continent’s economic model, Germany’s finance minister warned on Tuesday.
Peer Steinbrück’s comments were part of a concerted attempt by Europe’s economic leaders in Brussels to persuade companies to share profit with workers as well as shareholders.
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Joaquín Almunia, EU monetary affairs commissioner, suggested workers were not getting their full rewards from rises in productivity. “I don’t think this is a sustainable position.”
His concerns were echoed by Thierry Breton, French finance minister, who spoke about the need to “redistribute wealth created by companies” and by Jean-Claude Juncker, the Luxembourg head of the 13-country group, who said a “big debate” had started on sharing the fruits of Europe’s long-awaited recovery.
The co-ordinated message to Europe’s company bosses surprised some onlookers.
One EU official commented that the closing press conference of the monthly Ecofin council of finance ministers sounded “like a trade union meeting”.
The push to put more profit into workers’ hands has strong political overtones: Mr Steinbrück is a Social Democrat anxious to show his party is looking after workers’ interests in the German grand coalition government; Mr Breton was speaking ahead of the French presidential election.
But the finance ministers said there were strong economic arguments for a more equal distribution of profit.
Mr Steinbrück spoke of the “tension” between the advantages of low wage settlements of the kind seen in Germany – increased competitiveness and low inflation – and the stifling of domestic demand.
“There have been falls in real wages, real incomes that have been bad for domestic demand and we have suffered from that for quite a long time,” he said.
The idea of using other initiatives, such as employee share ownership schemes, to increase the link between profit and worker benefits was also discussed at Monday night’s meeting of single currency ministers.
One EU finance ministry official said the debate had “Thatcherite overtones” – a reference to the former British prime minister’s promotion of employee share ownership schemes.
Senior EU officials said the trigger for the debate was a speech on rising income inequality by Ben Bernanke, US Federal Reserve chairman, this month.
Ministers are treading a fine line between encouraging companies to share with workers while deterring unwarranted pay rises.
Copyright The Financial Times Limited 2007
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