Executive Perks

"All sense of proportion has gone out of the window with management pay in recent years," the Social Democrat (SPD) national chairman Kurt Beck said.

Beck is keen to put clear water between his party and Chancellor Angela Merkel's Christian Democrats (CDU) before parliamentary elections that must be held by September next year.

The SPD, the junior partner in the governing coalition, has put forward the idea of capping the amount that companies can set off against tax at 1 million euros ($1.6 million) per executive.

SPD Finance Minister Peer Steinbrueck, who generally takes a pro-business line, backed his party's proposals as "an important signal on how one should deal socially with ongoing pay and severance package excesses."

Distaste at this excess is widely felt. Merkel herself has condemned executive pay packages.

As the discussion gathered steam, the chancellor's spokesman said on Monday that Merkel had made clear repeatedly in the past that there was "little comprehension" for managers departing with large severance packages after their companies had shown a loss.

But Merkel's CDU and its Bavarian sister-party, the Christian Social Union (CSU), tended to the view that this problem was for boards of management to clear up and not for the politicians, he said.

CSU leader accuse SPD of bowing to leftist pressure

Erwin Huber, the CSU chief and Bavarian Minister of Finance, has rejected the SPD's plan, saying that it is "politically and ideologically motivated" and that, according to the tax laws of Germany, implementation of the plan would be "very problematic."

Huber added that he believed that the attack on executive pay by the SPD hierarchy was driven by "a fear of the leftists" in the party.

The minority liberal FDP, currently in opposition but hoping that next September's election arithmetic could see it in power alongside the CDU/CSU, takes an even more strongly free-market line.

The SPD's proposals were "in principle anti-market," FDP General Secretary Dirk Niebel told national public television.

The FDP party is fond of pointing out that 10 percent of German taxpayers -- those earning 66,000 euros and more -- pay 50 percent of all income tax.

Opponents on the left take this statistic as an indication of how skewed German pay is.

Pay divide becoming an election issue

A survey earlier this year by the Berlin-based DIW economic research institute found that the pay divide was widening rapidly.

Simultaneously, the middle class had undergone an alarming decline, from around 62 percent of the population in 1992 to 54 percent just 14 years later, the publicly funded institute said.

In response, Germany's trade union movement is showing increased militancy after years of wage restraint at the behest of politicians, like Steinbrueck, who were worried about the public finances.

Beck knows of the rising angst in the broader middle class at the growing gap between rich and poor.

He is also well aware that the SPD proposal on executive pay is a non-starter with the current government and that tax experts see problems in implementing it.

But he also knows he is onto a winner with a broad cross-section of the German electorate.