Porsche deal stokes German ire

Berlin - A king-sized bonus package for bosses at luxury car maker Porsche has raised hackles in Germany amid a fierce debate about fairness in executive pay and the prospect of a national minimum wage.

Six top board members at the automobile giant took a €113m bonus for their performance in 2006, including €70m alone for chief executive Wendelin Wiedeking, stunning the country.

The fact that the news broke the same week that postal workers won a hard-fought battle for a minimum wage of between eight and €9.80 an hour underscored an increasing disparity of wealth in Europe's biggest economy.

A study by the Hans Boeckler Foundation, which has close ties to the country's unions, confirmed this week what many Germans had already sensed: their buying power is steadily declining even amid a robust economic recovery.

"The distortion in the distribution of wealth and the rise of poverty among workers are a real problem for the economy and society as a whole," said the author of the study, Claus Schaefer.

The government has managed to drive unemployment to a 15-year low of 3.38 million people in November.

Rise of 'the working poor'

But trade unions and leftist parties cite the rise of "the working poor" who are unable to live off their earnings - a phenomenon long associated here with the United States but not the welfare states of western Europe.

Hourly pay of little more than €4 for hairdressers is not uncommon in some parts of the former communist east. Wages now only represent 40% of total German wealth, versus 50% in the 1990s and 56% in 1960.

In their place, revenues on investments and corporate profits have continued to rise.

"Only a small number of people are profiting," Schaefer said.

The Hans Boeckler Foundation study found that about one in five Germans can be considered poor, while social welfare groups say 2.5 million children and youths live below the poverty line.

At the same time many companies have posted record profits while cutting jobs and keeping a lid on pay rises for all but the top echelon of staff, angering average Germans.

'The dam has been broken'

The Porsche deal was only the most extreme example of a trend toward hefty bonuses and "golden parachute" dismissal deals for executives.

"I can understand why people feel something is wrong when some people's pay rises sharply while others' stagnates," President Horst Koehler told the business daily Handelsblatt this week.

Koehler, a former head of the International Monetary Fund, called for a corporate "culture of moderation" to foster "social cohesion."

The conservative premier of the southwestern state of Saarland, Peter Mueller, even called for a ceiling on salaries - a proposal unlikely to delight the executive class.

Germany does not have a ceiling, nor a floor, when it comes to pay.

Attempts by the Social Democrats (SPD), partners in Chancellor Angela Merkel's ruling coalition, to introduce a national minimum wage as is common in much of Europe have met with strong resistance from her Christian Democrats.

The deal for minimum pay for postal workers struck Thursday, however, could pave the way for more such agreements in other sectors, even if the conservatives succeed in blocking an across-the-board measure.

"The dam has been broken and a €10 minimum wage is now the target for all sectors - if that's what mail carriers are getting, then trained workers are hardly going to be satisfied with less," the conservative daily Frankfurter Allgemeine Zeitung wrote Friday.

'Motivational' bonuses

"The SPD has found a strong election campaign issue in the minimum wage - how does Merkel plan to prevent a minimum wage of 15 or 20 euros being demanded before the next election?"

Employers' groups, while defending "motivational" bonuses to executives, say a broad-based minimum wage would be a job killer that would send international companies packing.

But the calls for higher pay have helped already the ailing Social Democrats gain some traction with voters as the price of butter, milk, petrol and heating oil continue to soar.

Inflation reached three percent in November, taking a toll on already wobbly consumer confidence.

Retail sales dropped 3.3% in October compared to September, according to data published Friday, in a further sign that average Germans have serious concerns about their disposable income - a factor analysts say could undermine the current recovery.