REFILE -German move on East Europe labour seen too late

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By Natalia Reiter

BERLIN, July 30 (Reuters) - Suggestions that Germany might open its borders to workers from European Union states to its east are welcome, but the move could come too late to combat a shortage of skilled labour effectively, economists say.

More than three years after the major eastward enlargement of the European Union, German officials say they are considering lifting the ban on workers from the new states earlier than previously planned.

The hope is that skilled labourers from the east can help plug a widening hole in key industrial sectors which risks hampering the upswing in Europe's largest economy.

But many of the skilled workers Germany is seeking have already left home for EU states which opened their borders earlier. The exodus of millions of young Poles, Lithuanians and others in recent years has left their countries with labour shortages of their own.

"Germany has a brilliant idea but too bad the timing is totally wrong," said Klaus Zimmermann, the head of the Institute for the Study of Labor in Bonn. "Germany already missed its chance. The good workers are somewhere else now."

Germany's economy grew at a 2.8 percent pace last year, its best rate since 2000, and the expansion is set to continue this year. However, businesses say production in key sectors is now suffering from a lack of engineers and other skilled workers.

Employers group Gesamtmetall, whose members employ over half the country's industrial workforce, said last month that the number of vacant positions in the metals and engineering sector had surged 50 percent over the past year.

It said 10 percent of the firms in the industry were reporting major production problems linked to labour shortages.

When 10 new member states joined the bloc in 2004, a number of western European countries opened their borders, letting in millions of workers from the East.

Germany, fearing thousands of migrants would undermine its fight against unemployment, refused to do so. Just last year, it extended a ban on labour migration from the new EU states for another three years despite appeals from business lobbies.

RIGHT STEP

Economists say the estimated 3 million people who left eastern Europe in recent years have added billions of euros to the economies of the countries they went to and have also helped keep inflation in check.

"Germany could have made much greater economic progress if it had taken the right steps at the right time," said Holger Schaefer from the Institute for the German Economy, which estimates that missing personnel are costing Germany about 3.5 billion euros a year.

Last week German officials suggested the ban on the eastern workers could be abandoned before 2009. Chancellor Angela Merkel's coalition is expected to discuss such steps at a meeting next month.

Even if it does come late, economists say any move to loosen current restrictions would send a positive signal to Germany's EU neighbours and non-EU countries.

But few believe it would resolve the country's current economic dilemma.

"It would only be a drop in the bucket," Willi Fuchs, head of the German engineering association (VDI) said in the Financial Times Deutschland. "We're not as attractive as we think. Many people would rather go to England or France."

Keywords: GERMANY LABOUR/