The head of the Social Democratic Party (SPD) Kurt Beck said he wants to make it easier for employees to take a stake in German companies.

According to an SPD plan, employees could buy shares in a so-called "Germany Fund," whose assets participating companies could access for capital. The companies would then direct their dividends, interest and repayments back to employees who paid into the fund.

Beck said the SPD model minimized the risk of market fluctuations or company bankruptcies since the fund would be widely spread.

"If the German fund owns shares for example in 1,000 companies, it won't collapse if two go bankrupt," Beck said in an interview with the latest issue of the weekly newsmagazine Stern.

Three-way deal

The Germany fund would be a three-way deal between employer, employee and fund. It would be promoted by government subsidies.

Married couples with an annual gross income of up to 40,000 euros ($53,800) and singles with income of up to 20,000 euros would be able to invest up to 400 euros per year in the fund. According to Beck's concept, the government would subsidize this with a further 20 percent, or 80 euros.

In addition, companies could give their employees shares in the fund worth a maximum of 240 euros per year tax-free. A federal guarantee would protect the funds from insolvency.

Beck said the SPD wanted to push through the plan in the second half of this legislative period. He said he would present his concept to Chancellor Angela Merkel at a cabinet meeting in August.

CDU has its own plan

Both the SPD and its center-right coalition partner, the Christian Democratic Union (CDU), have been working on concepts for employee shareholding for some time. Both want a model that allows employees to profit if their company is doing well -- without risks that are too high.

The CDU will be presenting its model for employee investment on Friday. The party's general secretary Ronald Pofalla said that Beck's proposal went in the direction of the CDU's.

"We want more employee participation in earnings and capital," Pofalla said, adding that it was also a way to make companies more productive and competitive.

Fund could become a bureaucratic monster

There has, however, been criticism from the private sector. The head of the Confederation of German Employers' Associations, Dieter Hundt, said Beck's proposal went in the wrong direction. It was contrary to the actual character of capital participation, he said.

"It's more than questionable how the benefits of equity participation are supposed to work when a national, bureaucratic fund is connecting the employees involved and their companies," Hundt said.

Klaus Zimmermann, head of the reputable German Institute for Economic Research DIW, called the concept "nothing more than a state-run, subsidized and government secured investment for an equity fund." He told the daily Neue Osnabrücker Zeitung that it was problematic to create new subsidies for such a concept.

According to Stern, the powerful labor unions DGB and IG Metall were involved in developing the SPD concept. Up to now, unions have been very skeptical about developing capital investments by employees due to fluctuating stock prices and the risk of insolvency.