German reformshang in the balance

5th December 2003, Comments 0 comments

5 December 2003, BERLIN - Chances for a deal on key German economic reforms appeared to be sinking with time running short for a deal between Chancellor Gerhard Schroeder and opposition conservatives.

5 December 2003

BERLIN - Chances for a deal on key German economic reforms appeared to be sinking with time running short for a deal between Chancellor Gerhard Schroeder and opposition conservatives.

Speaking in Astana Friday at the end of trip to China and Kazakhstan, Schroeder called on the Christian Democrat-led opposition to put the German people before party politics in the negotiations over his package of reform measures.

"I hope that the reform process can be successfully followed through... I don't want to give up hope," said Schroeder, adding that the next two weeks will be crucial in hammering out a compromise on the reform package.

Schroeder's left-leaning government earlier this year approved a series of laws including tax cuts, limited labour market reform and reductions to German social welfare and jobless benefits.

But after passing parliament's lower house, the Bundestag, the bills were rejected by the Christian Democratic alliance (CDU/CSU) dominated upper chamber, or Bundesrat.

Government and opposition have been seeking to mediate compromise legislation over the past three weeks - but with scant success so far.

Time is now running out given that the mediation committee will have its final session on 10 December.

Roland Koch, the CDU Prime Minister of Hesse state who heads the committee's working group on labour reform said he saw scant chances of reaching a deal on labour and taxes.

Conservatives demand more radical liberalisation of Germany's strict laws on sacking workers and one-size-fits-all wage packages for entire sectors.

They also reject Schroeder's use of new debt to finance most of next year's EUR15.6 billion  income tax cut and instead demand state spending cuts.

Gerhard Stratthaus, CDU finance minister of Baden-Wuerttemberg who heads the working group on taxes, also warned that bringing forward income tax cuts planned for 2005 to next year faced high hurdles.

But he said agreement was likely on a less ambitious tax amnesty for people who have stashed money abroad and plans to raise the tax on tobacco.

Government leaders are also trimming back overall expectations on a comprehensive reform deal.

Finance Minister Hans Eichel admitted he was "sceptical" over the possible mediation results and warned conservatives over consequences of allowing the package to fail.

The reforms are seen as crucial to jump-start Germany's economy which has stagnated for the past three years and is expected to post zero growth this year. The jobless rate remains stuck at 10 percent and is expected to rise during the winter.

DPA
Subject: German news 

 

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