German chancellor Angela Merkel visited workers at Volkswagen's Wolfsburg plant yesterday and gave strong backing for the Volkswagen Law.

She said the Volkswagen Law will survive, dismissing pressure from the European Union and from Volkswagen's largest shareholder, Porsche, to abolish the law.

"We have taken account of the European Court of Justice decisions and we have complied with the judgement completely," she told around 18,000 workers at the plant.

Last year the European Court of Justice ruled the 48 year old Volkswagen Law illegal because it breached European laws on the free movement of capital. That law was put in place when Volkswagen was privatized to protect it from hostile takeover. It has been replaced by a new law but that law retains a power of veto for the state of Lower Saxony on all major decisions. Lower Saxony owns 20% of the shares in Volkswagen. The largest Volkswagen shareholder is Porsche, with 35% shareholding.

Porsche now has a controlling stake, and has said it will increase its stake to over 50% by November. Workers are concerned that Porsche is trying to remove historic workers rights, and that Porsche might shift production to lower cost locations and cut jobs in Germany.

Merkel told workers she would vigorously defend the right of Lower Saxony to have a power of veto with its 20% stake, rather than the 25% that would normally be applicable for such a power to be granted. She said that shifting Volkswagen production outside of Germany, against the will of the workers, should not be possible, and in any case does not make sense in these times of 'globalisation'.

Bloomberg news agency added that recent market turmoil was cited as another reason for maintaining the law. She said that the current banking crisis only escalated because there are "not enough rules and too little transparency".

Automobilwoche noted that Merkel stood on the stage at the meeting alongside workers representatives. On the other side of the stage were senior company managers, including Martin Winterkorn, where there would also have been space for her to sit had she chosen to do so.