Germany struggles to open up its mail delivery market

The German government agreed to end the letter delivery monopoly of Deutsche Post as planned, but the issue is still a thorn in the eyes of the grand coalition.

Christian Democrats (CDU) and their Social Democratic (SPD) coalition partners agreed to liberalize Germany’s mail delivery market as part of European Union moves to deregulate postal services across the 27-member bloc.

Starting Jan 1, 2008, letters weighing up to 50 grams (1.8 ounces) will no longer be the monopoly of Deutsche Post, the world’s biggest post and logistics group.

According to government sources, Chancellor Angela Merkel and head of Social Democrats (SPD) Kurt Beck reached an agreement on Tuesday evening.

The SPD had previously sought to extend the monopoly beyond the deadline, partly because other EU member states will have to open up their mail service markets in 2009.

A controversial issue

Bildunterschrift: Großansicht des Bildes mit der Bildunterschrift: Private delivery services are in favor of market liberalization
The dismantling of Deutsche Post’s monopoly on letter delivery remains, however, a thorn in the eyes of the coalition partners.

A spokesperson for the ministry of finance said late on Tuesday evening that the Social Democrats remained convinced that the deregulation of the post service in Germany ought to take place only in concert with other European countries to make sure Deutsche Post doesn’t suffer unfair competition.

With the countdown underway to the end of its letter monopoly, Deutsche Post has been moving to diversify away from its dependence on its German operations and is hoping that its international businesses will help to offset the pressure on earnings in its domestic market.

Deutsche Post chief Klaus Zumwinkel, however, warned last week that the opening up of the letter delivery service could endanger up to 32,000 jobs.