Posted Sunday, June 1, 2003; 14.38BST
Reluctantly, they are embracing unpopular measures they ducked for decades — and that's enraging labor union members, who turned out in the hundreds of thousands in Paris late last month. Public-sector workers crippled transportation and shut schools to protest a change in pension rules that would require them to work for 40 years, rather than 37.5 years. In other words, they were protesting the same new reality that confronts Blet and many others: if European economies are to fight off long-term stagnation and unemployment, then Europeans will have to work longer or harder — or for less pay. No wonder so many people have been marching; who would want this sort of holiday to end?

For workers like Rüdiger Hass, it already has. He took a 10% pay cut last year to save his job. Hass is a 19-year veteran of Dienes Werke, a company in Overath, near Cologne, that makes industrial knives and other cutting equipment. Sales fell last year to €35 million, and the ceo, Bernd Supe-Dienes, the grandson of the founder, is doing all he can to cut costs. A decade ago he started moving some production to Hungary, where labor costs are one-quarter what they are in Overath. Since then, he's created 200 jobs in Hungary, and just 40 in Germany. Last year he reached an agreement with German employees to reduce working hours by 10% in return for a cut in pay.

Hass accepts the push into Hungary: it wouldn't be possible for the same products to be made as competitively in Germany. "It's better to give up some jobs to keep the company alive," he says. He's not thrilled about earning less, but it's better than being out of work.

Many other German firms have been moving production abroad. Last week, a survey showed nearly one in four German firms intends to transfer some facilities out of the country over the next three years. The exodus is not just in high-wage manufacturing, but also corporate operations such as administration or R and D. The oft-cited reasons are high labor costs and inflexible rules.

But shifting production isn't enough for Supe-Dienes, who is now trying to shrink his Overath workforce from 200 to 175. That's happening mainly through attrition, but he's laying off six people. It's a cumbersome process that requires giving formal notice and often going before a labor tribunal. The procedure can take about four months, and usually ends in an out-of-court settlement. Once, when he didn't settle, the ruling went against him and he ended up having to reimburse a government agency for the months of unemployment pay the dismissed worker had drawn while the case was being considered. "I won't risk that again," Supe-Dienes says.

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