German new vice-chancellor is ready to defend workers' interests

Franz Mьntefering, who once likened financial investors to "locusts", is to become vice-chancellor in the German government, it emerged on the day the European Central Bank urged the country to embrace such investors for their "useful macroeconomic" contribution.

Mr Mьntefering, chairman of the Social Democratic party, said Thuesday he would also become labour minister in the country's national-unity government and deputy to Angela Merkel, the country's next chancellor.

The announcement coincided with the release of the ECB's monthly bulletin, in which it praised private equity investors for "complementing the banking sector and primary capital markets".

Private equity allowed mature industries to undertake "governance or balance sheet restructuring without being subject to the shorter-term pressures of the public equity markets", the bank said.

Mr Mьntefering voiced a less flattering assessment of investors' macroeconomic function in April, when he compared private equity funds to "swarms of locusts" preying on German companies.

He has said that the state should protect "those entrepreneurs who fight for the sustainability of their companies and the interests of their workers against the irresponsible swarms of locusts that measure success on a quarterly basis and let companies die once they have sucked them dry".

Yet it was a far friendlier message that transpired yesterday as he named the eight SPD ministers who will sit on Ms Merkel's cabinet.

On balance, the list was weighted towards advocates of economic reforms and only included one prominent leftwinger. Peer Steinbrьck, the former premier of the industrial state of North Rhine-Westphalia and the most economically liberal figure on the list, landed the crucial finance portfolio, according to Financial Times.

Mr Steinbrьck will face the tough and potentially unpopular task of bringing Germany's budget deficit back in line with the European Union's fiscal rules by 2007.

In addition to the budget, his remit will include reforming the country's Byzantine tax system. To do so, he will have to scrap some of the popular 168 tax breaks and loopholes that cost the state Ђ83.5bn ($100bn) a year.

Mr Steinbrьck's success will depend on support from Ms Merkel, a requirement if he is to win the budgetary battles with his cabinet colleagues.

T.E.