Deep rift between Merkel and German industry

25th July 2006, Comments 0 comments

25 July 2006, BERLIN - A growing rift between German Chancellor Angela Merkel's government and business has plunged the major industry representative groups in Europe's biggest economy into a crisis. The decision by a close Merkel confidant, Norbert Roettgen, to turn down a key post at the influential Federation of German Industry (BDI) has exposed the divisions in what was once the rather cosy world of the country's corporate state. More specifically, Roettgen's surprise withdrawal Friday has raised quest

25 July 2006

BERLIN - A growing rift between German Chancellor Angela Merkel's government and business has plunged the major industry representative groups in Europe's biggest economy into a crisis.

The decision by a close Merkel confidant, Norbert Roettgen, to turn down a key post at the influential Federation of German Industry (BDI) has exposed the divisions in what was once the rather cosy world of the country's corporate state.

More specifically, Roettgen's surprise withdrawal Friday has raised questions about the future of BDI chief Juergen Thumann, who strongly defended Roettgen's plan to take up the new job in January, and at the same time to hold onto to his seat in parliament until the next election due in 2009.

As the criticism of his role in the Roettgen affair continued, Thumann has been forced to move to head off speculation that he might be forced to resign.

Roettgen's decision to give up the BDI post following widespread criticism and claims of a conflict of interest has now focused attention on another member of Merkel's conservative political bloc, Reinhard Goehner who also holds a senior business lobbying job while continuing to sit in parliament.

Like Roettgen, Goehner, who is managing director Germany's Employers Federation, has insisted that he saw no reason to give up one of his posts and instead has hit out at his critics arguing that he should be seen as a model and that more parliamentarians should hold jobs in industry.

The tensions unleashed by Roettgen and Goehner, who has held his post at the employers federation for the past decade, have also sparked fresh calls for a new code of conduct for German politicians.

"Parliamentarians being paid for dual functions damages the credibility of politics and parliament," said Rainer Bruederle, a senior member of the opposition Free Democrats.

This is not the first time that German politicians have come under fire for holding seats in parliament while at the same time receiving an income from other sources.

However, the cases involving Roettgen and Goehner come against the backdrop of growing disenchantment in business about the move by the Merkel-led grand coalition to step back from a comprehensive economic reform agenda and to place growth at risk by hiking up consumption tax and healthcare charges next year.

The hefty three percentage points increase in VAT planned for January is expected to have contributed to a fall in the latest Ifo German business confidence survey which is one of the nation's major economic indicators and is to be released Wednesday.

At the same time, there is a sense of dismay in industry about the new corporate tax blueprint unveiled earlier this month by the Merkel government, which includes a plan to tax interest rate payments.

Some business leaders have gone as far as to suggest privately that it would be in the best interests of economic reform if the grand coalition of Merkel's Christian Democrat alliance and the Social Democrats came to an end and fresh elections held.

The coalition which was forged following last year's inconclusive national election is likely to come under increasing pressure in the coming months. analysts expect the economy to slow and unemployment to pick up again during the cold winter months.

In the meantime, there have been signs of growing disquiet in the ranks of industry about the failure of the leadership of the business groups to press home the point to Berlin about the need for more economic reform.

After helping to spearhead the criticism of Roettgen's plans to take on the BDI job while hanging on to a seat in parliament, former BDI President Michael Rogowski turned his attack on Thurmann.

While senior BDI officials have come out in support for Thumann, Rogowski lashed out his successor telling a German newspaper: "If there is a grand coalition and scarcely a parliamentary opposition then the BDI has to publicly demonstrate a clear economic-political alternative."

DPA

Subject: German news

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