Confusion over Berlin movesto battle record joblessness

10th March 2005, Comments 0 comments

10 March 2005 , BERLIN - Confusion over Germany's steps to boost faltering economic performance and tackle the nation's record high unemployment has set in just one week before a planned growth and jobs meeting between Chancellor Gerhard Schroeder and opposition leaders.

10 March 2005 

BERLIN - Confusion over Germany's steps to boost faltering economic performance and tackle the nation's record high unemployment has set in just one week before a planned growth and jobs meeting between Chancellor Gerhard Schroeder and opposition leaders.

The lead story in many German newspapers on Thursday was that Schroeder had in a speech promised "additional measures" to battle record high post-war unemployment.

The comment was widely interpreted as a plan for the emergency running up of new debt to fund job creation programmes.

There was just one problem: Schroeder didn't say it.

The German leader pointedly omitted this one sentence in his on Wednesday evening speech opening Hanover's CeBIT computer trade fair, an advance text of which had provided to reporters.

A few papers with late deadlines got the story right: "Growth programme: Chancellor sows confusion," was the banner headline of the Berliner Morgenpost.

Another newspaper, the left-leaning Berliner Zeitung which has good links to the government, suggested why Schroeder chose to leave out the key sentence.

Quoting unnamed senior officials, the paper said given Germany's strapped finances the Chancellor has rejected any major injections of state cash to boost the economy.

The reason for this is easy to grasp: Germany has overshot the eurozone budget deficit rule for the past three years in a row and looks likely to do so again in 2005. Budget deficits are not supposed to exceed 3 percent of GDP in the 12 euro single currency states.

Instead of massive state spending, the Berliner Zeitung said Schroeder will next week unveil a mix of infrastructure projects, low-interest business loans from the state-owned KfW bank and a possible reduction of corporate taxes for reinvested profits.

Opposition Christian Democratic Union (CDU) leader Angela Merkel, in a speech to parliament Thursday, said this would not be enough and called for slashing back bureaucracy to speed up approval for corporate investment.

Merkel also slammed Schroeder's plan to ram through an anti-discrimination law demanded by his Greens coalition partner. Heavyweight cabinet ministers from Schroeder own Social Democrats (SPD) - including Economics Minister Wolfgang Clement and Interior Minister Otto Schily - oppose the move as harmful to business. 

Schroeder will present his jobs package to parliament next Thursday and a few hours later will meet conservative opposition leaders - who control the chamber's upper house - in a bid to win their support.

Most analysts say this is a clever political move by Schroeder which will leaves the opposition in the awkward position of backing the government or else being tarred as seeking to block moves aimed at curing Germany's jobs misery.

Hopes for for this meeting, which has been dubbed a "jobs summit" are already low.

A newspaper in one of the economically hardest hit eastern German states, Saxony-Anhalt with a staggering 23 percent joblessness, could hardly contain its scorn over the planned meeting.

"This won't be a reform meeting - it'll be tea time," said the Volkstimme of Magdeburg in a leader.

Soaring unemployment is a potential political disaster for Schroeder who is already informally campaigning for re-election in next year's general election.

The national jobless rate rose to 12.6 percent last month, representing 5.2 million unemployed- the most since Germany began its economic recovery after World War II. In some parts of economically hard-hit eastern Germany the rate is close to 30 percent.

"Mass joblessness is a cancer which has been building up for the past 30 years," warns Bert Ruerup, the head of the government's Council of Economic Advisers.

Emerging from three years of stagnation, the German economy grew by 1.6 per cent last year.

But most economists say sustained growth of at least 2 percent is needed in order to make a dent into unemployment.

And before the German economy has really taken off it already appears to be faltering.

A top German economic think-tank, the Institute for the World Economy (IfW) in Kiel, on Wednesday trimmed its growth prediction to a grim 0.6 percent for 2005.

Up until now, most analysts have predicted growth of between 0.8 and 1 percent this year with the German government is sticking to projections of 1.6 GDP growth.

For 2006 the IfW predicted better but still sluggish German growth with GDP expected to expand by 1.3 percent.

This is additional bad news for Schroeder.

The Chancellor is banking on his social welfare and tax reforms providing a bigger economic surge in advance of the autumn 2006 federal election to help his centre-left government clinch a third term in office.

An opinion on Wednesday for the first time this year showed the conservative opposition with a majority. As Schroeder himself admits, the lag-time before his reforms kick in and provide relief may turn out to his biggest problem.

[Copyright DPA with Expatica 2005]

Subject: German news


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