Germany makes short work of the downturn with Kurzarbeit scheme

German companies are roaring back from recession, outstripping foreign rivals, and are now looking to take on more staff.

• German firms, such as Siemens, above, kept staff on full pay but working fewer hours when orders fell, ready to reverse the trend when they picked up Picture: Getty

Its industries currently need 34,000 engineers and 23,000 factory workers. And Chancellor Angela Merkel has recently declared full employment a realistic goal as the unemployment rate, sitting at 6.9 per cent, has hit its lowest level in the 20 years since reunification.

In contrast Spain has 20 per cent unemployment while impoverished Ireland's joblessness has hit 13.6 per cent.

Just a year ago, Hawe, based near Munich, had cut its work force by one-third, and the remaining 350 employees were working at most three days a week. But orders started rolling in over the winter as world trade reignited, and managers increased production of high pressure pumps and valves for machining tools, wind energy and solar power plants. The company is now struggling - to find qualified staff.

When the slowdown arrived and production slowed, part of the German government's reaction was to enact measures giving firms greater flexibility to keep workers on, but at reduced hours, subsidised by the state.

Many firms, from Hawe to Siemens, credit the "Kurzarbeit", or short work, programme with having helped them ride out the crisis before phasing it out this summer. It was used by Daimler, BMW and many others.

The scheme let managers and workers agree from one day to the next if they would add or subtract shifts, a more flexible solution than laying off entire divisions, as was done previously, said Thomas Heindl, manager of Hawe's Freising plant.

Instead of seeing its workforce slashed, Hawe retained 350 workers ready to spring into action when orders picked up. "We were very surprised the crisis was overcome so quickly. We had to react very quickly," Mr Heindl said.

The story of how the German labour market rebounded from crisis is just such a combination of public and private efforts, experts say. They include the underlying healthy state of German industry, the impact of prior welfare cuts and measures taken to manage the downturn.

"I think the best thing they did was even before the crisis, ten years ago or so when they concentrated on improving production, keeping wage growth moderate and gaining competitiveness and market share. That was their consistent and underlying strength," said economist Marco Annunziata.

A 2003 package of economic reforms and welfare-state cuts included reduced job benefits and looser employment protection. It was launched by then chancellor Gerhard Schroeder and dubbed Agenda 2010, the theoretical date when benefits would be evident. Though fiercely criticised, some goals seem to have come in on schedule.

Germany's prosperous south - home to Daimler, BMW and Mercedes as well as Siemens and scores of smaller businesses - has now achieved on a regional level something close to Ms Merkel's vision of full employment. Bavaria and Baden-Wuerttemberg currently have jobless rates of 3.8 per cent and 4.4 per cent.