Anger over call to slash helpfor Germany's poor regions

13th September 2004, Comments 0 comments

13 September 2004 , BERLIN - Calls by Germany's president to cut huge subsidies for poorer regions of the country and for workers to be more mobile were met with a mainly angry response on Monday. President Horst Koehler, who formerly headed the International Monetary Fund, attacked two German sacred cows in a Focus news magazine interview. First, Koehler rapped the "Laenderfinanzausgleich" - a complex law which requires richer German states such as Bavaria and Hesse to send money to poorer states like Bra

13 September 2004

BERLIN - Calls by Germany's president to cut huge subsidies for poorer regions of the country and for workers to be more mobile were met with a mainly angry response on Monday.

President Horst Koehler, who formerly headed the International Monetary Fund, attacked two German sacred cows in a Focus news magazine interview.

First, Koehler rapped the "Laenderfinanzausgleich" - a complex law which requires richer German states such as Bavaria and Hesse to send money to poorer states like Brandenburg and the Saar.

The law's goal is to create equal conditions of prosperity throughout Germany. But critics allege it subsidizes bad practices and slows reform in economically weak regions.

Koehler underlined that despite the transfers there remain big differences in wealth not just between former East and West Germany but also between booming southern Germany and the generally poorer north.

"Those who want to flatten out (differences) are cementing the state subsidy system and placing an unbearable debt burden on the younger generation," warned Koehler.

Germany needs to get away from the subsidy mentality, said Koehler who is a conservative. He did not, however, call for abolishing the entire wealth transfer system.

Second, the president dismissed the widely held German view that jobs need to be taken to workers and not the other way around.

"If someone seeking employment fails to find a job near their home which corresponds to what they are seeking then they must decide: either go where they see chances ... or make a conscious decision to give priority to staying in their hometown," said Koehler.

Traditionally, Germans have been less mobile than, say, Americans when it comes to changing jobs. But in a major shift, east Germans have over the past decade left their economically hard hit region in big numbers to take jobs in western Germany.

President Koehler is Germany's mainly ceremonial head of state but his office has considerable moral authority in setting the political agenda.

Brandenburg's Premier Matthias Platzeck, a member of Chancellor Gerhard Schroeder's Social Democrats (SPD), sharply rejected Koehler's views.

It was impossible to accept the fact that some parts of western Germany have unemployment rates of 5 percent, compared with 25 percent in hard hit regions of the east, he said in plea for keeping the present system.

Petra Pau, a parliamentary member of the former East German communists - the Party of Democratic Socialism (PDS) - slammed Koehler's demands "astonishing" and warned that if implemented they would increase the gulf between rich and poor.

"Koehler - president of all Wessis!" screamed the banner headline of the Berliner Kurier tabloid which sees itself as a champion of all things east German. The term "Wessis" and "Ossis" are derogatory nicknames for west and east Germans.

But some western German leaders were more welcoming.

North Rhine-Westphalia's Premier Peer Steinbrueck said his state was facing enormous financial burdens because of cash transfers to eastern Germany.

About two-thirds of the EUR 700 million of debt held by the city of Duisburg has been caused by sending money to the east, he complained.

Rolf Peffekoven, a former member of the Chancellor's council of economic advisers, also welcomed the Koehler initiative.

Peffekoven noted that wealthy states like Baden-Wuerttemberg lose 0.80 cents of every EUR one in additional tax revenue to the transfer system.

"It's not worth it for them to make bigger efforts (to boost tax revenue)," he said in an interview with Der Spiegel magazine's website.

DPA

Subject: German news
 

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