Merkel cabinet faces up to government tensions

10th January 2006, Comments 0 comments

10 January 2006, BERLIN - German Chancellor Angela Merkel's cabinet Tuesday wound up a special two-day strategy meeting with plans to underpin the nation's low-wage sector as part of a government push to shore up the economic upturn underway in the country. The meeting, which was held at a 19th century villa on the outskirts of Berlin, also considered several key issues such as nuclear energy and health reform, which have exposed deep divisions in Merkel's grand coalition government. Merkel, along with Vic

10 January 2006

BERLIN - German Chancellor Angela Merkel's cabinet Tuesday wound up a special two-day strategy meeting with plans to underpin the nation's low-wage sector as part of a government push to shore up the economic upturn underway in the country.

The meeting, which was held at a 19th century villa on the outskirts of Berlin, also considered several key issues such as nuclear energy and health reform, which have exposed deep divisions in Merkel's grand coalition government.

Merkel, along with Vice-Chancellor and Labour Minister Franz Muentefering, emerged from the Genshagen Palace retreat Tuesday to declare that the meeting had set the course for more economic growth.

The Chancellor told reporters that her government's aims were investment, restructuring and reform.

On the previous day, the cabinet signed off on a 25-billion-euro (30 billion dollar) growth package, which is to run through to 2009 and includes investments in transport projects and tax breaks for small-to-medium sized businesses.

The 16-page programme also sets out assistance for parents as well as moves to help Germany's ailing building sector by encouraging people to repair and renovate their homes.

Finance Minister Peer Steinbrueck stressed that the boost for growth and jobs agreed to by the government complimented its push for budget consolidation.

Berlin is planning to knock Germany's public finances into shape so as to meet next year the three per cent deficit target for euro member states.

The Genshagen Palace retreat also comes less than two months after Merkel was sworn in as Chancellor to head up a new coalition government comprising her conservative political bloc and former Social Democratic rivals.

The launch of the new package follows a batch of better-than- forecast economic data and sentiment surveys with some analysts having already revised up their German growth projections to two per cent this year - more than double the 2005 expansion rate.

Leading members of Merkel's alliance of Christian Democrats (CDU) and Christian Social Union (CSU) have been calling for a rethink of plans to phase out nuclear power stations.

But cabinet decided to stick to the coalition agreement to continue the policy of former Chancellor Gerhard Schroeder to wind back atomic energy in Europe's biggest economy.

Instead, Merkel confirmed that the government would hold a special energy summit in April to set out the parametres for energy policy in the coming years.

Last week's so-called gas war between Ukraine and Moscow, which resulted in a disruption of gas supplies to Europe, has lead to a renewed focus on energy in Germany, which relies on Russia for about a third of its natural gas.

Merkel's government also hopes to lay aside differences on health reform and to present by March a new concept for a makeover of the nation's lumbering health service.

Health reform was essentially one of the key unresolved issues left over from the negotiations to form Merkel's grand coalition government. Key government leaders have been insisting that a makeover of the health service was one of its priorities for 2006.

At their meeting in Genshagen, ministers also decided to set up a special working group to draw up proposals for reshaping the low-wage sector, including subsidising wages and the possible introduction of a minimum wage.

"We have to improve the structure and to ensure a greater sense of security (in the sector)," said Muentefering with officials insisting that support for wages would not result in an increased burden on the national budget.

However, talk about a possible minimum wage has been roundly attacked by German business.

What is more, many economists have criticised Merkel's government for failing to set out any comprehensive proposals for reforming the job market and tackling the array of labour regulations that labour analysts believe hinder job creation in the country.

In addition, many economists are predicting that German economic growth should start to level off in 2007 as Berlin's plans for cutting the nation's deficit kick in.

DPA

Subject: German news

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