German lawmakers agree welfare reform to boost benefits, training

FILE PHOTO: The Employment Office "Amt fuer Arbeit" designed by Bauhaus architect Walter Gropius, one of UNESCO world heritage sites of the eastern German city of Dessau, is pictured in Dessau, Germany, March 5, 2022. Picture taken March 5, 2022. REUTERS/Wolfgang Rattay

BERLIN (Reuters) - German lawmakers have agreed a welfare reform to raise unemployment benefits and help train people who are out of work, with a view to addressing a skills shortage in Europe's largest economy.

The reform is less ambitious than one originally planned by the left-leaning government, which the conservative opposition blocked in the upper house of parliament last week.

The government and conservatives subsequently agreed the revamped version, which a parliamentary mediation committee approved late on Wednesday. It still requires formal approval by parliament, on Friday, but this is essentially a formality.

The main change to the original plan is the removal of a so-called "trust period" of six months, during which job seekers would have received full benefit payments even if they failed to appear at appointments.

The change means the amended reform, which will introduce Buergergeld, or "citizens' money", loses a key distinction from the Hartz IV system it will replace, which also sanctions people who reject job offers.

"It is not really the end of Hartz IV. You've changed the system a bit, but you haven't really abolished it," Clemens Fuest, president of the Ifo economic institute, told Reuters this week of the amended reform.

Under Hartz IV, introduced from 2005 at a time of low growth and high unemployment, recipients of unemployment benefits can have their payments cut if they reject a job offer. Experts say the benefits it offers fail to cover basic living costs.

The overhaul will still put more money into the pockets of recipients of state benefits and offer more to those in vocational training.

By contrast, the French government is planning to rein in unemployment benefits when the jobless rate is less than 9% under a plan presented on Monday that aims to tackle staff shortages.

Germany's skills shortage is holding back businesses, with the aging population posing a demographic time bomb for the public pension system -- a threat ministers want to defuse with immigration and training.

(Writing by Paul Carrel; Editing by Tomasz Janowski)

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