Merkel under fire over reform track record

11th November 2007, Comments 0 comments

11 November 2007, Berlin (dpa) - After two years of power, Chancellor Angela Merkel's ruling coalition is coming under a growing chorus of criticism of its track record on economic reform.In a scathing report, the government's own panel of economic advisers added its name to the list of critics of Berlin's approach to reforms warning Merkel not to backtrack on the often painful changes that have been introduced in recent years. With Germany having turned in a solid round of economic growth rates in recent

11 November 2007

Berlin (dpa) - After two years of power, Chancellor Angela Merkel's ruling coalition is coming under a growing chorus of criticism of its track record on economic reform.

In a scathing report, the government's own panel of economic advisers added its name to the list of critics of Berlin's approach to reforms warning Merkel not to backtrack on the often painful changes that have been introduced in recent years.

With Germany having turned in a solid round of economic growth rates in recent years, panel chairman Bert Ruerup said Germans were currently enjoying a "reform dividend."

But handing the 627-page report to Merkel in Berlin, panel chairman Bert Ruerup expressed concern about a push to "water down" the reforms that have been launched in recent years.

"Unfortunately, in contrast to the last legislative period, a clear direction is lacking," the report argues. "Instead there is a risk that reforms that were correct and pioneering are being impeded or even rolled back."

Defending her government, Merkel picked up on the title of the panel's report to insist: "We will not squander what has been achieved."

"You can rest assured that important reforms won't be rolled back," she told the five members of the panel. "On the contrary, we're actually working on further important reforms."

But economists are growing concerned that signs Germany is losing economic momentum combined with early moves by political leaders to position themselves ahead of the next election in 2009 could finally kill off any hopes of further major reforms in Europe's biggest economy.

Despite Merkel's comments, a concerted drive is underway among members of her coalition to soften the tough welfare and labour reforms launched by Social Democrat Chancellor Gerhard Schroeder.

"A roll backwards when it comes to reform can quickly turn into a death-defying political somersault," said the presidents of Germany's powerful federation of industry (BDI) and employers' federation Juergen Thumann and Dieter Hundt in a joint statement following the release of the panel's report.

Criticism of the government's reform course has emerged as a major theme for both Thumann and Hundt.

"Some politicians obviously believe that the modernization of our country has been completed," Thumann said recently and went on to call on the German political establishment "not to be faint-hearted in confronting left-wing populism."

Worries about Merkel's reform agenda in particular follows a drive by the junior member of her grand coalition government, the Social Democrats, to pull back from Schroeder's unpopular reform package, known as Agenda 2010 and which helped pave the way for his defeat at the polls in 2005.

Critics of the Schroeder reforms now want to extend unemployment payments to older people and retreat from the plan to raise the retirement age to 67, which has been one of the few economic reforms launched under Merkel.

More recently, sharp falls in unemployment together with record exports have helped Germany to emerge from a protracted period of stagnation, and, as a consequence, allowed Merkel to bask in a renewed sense of national economic optimism - and critics say to backpedal on her previous commitment to far-reaching reform.

However, Germany's five leading economic institutes have also warned Merkel's government in a report presented in Berlin last month that now was not the time to ditch the reform process: "Much more additional work needs to be done rather than roll back the reforms so far discussed."

Economists expect the nation's growth rate to slip back a gear to about 2 per cent next year after chalking a solid 2.6-per-cent expansion rate this year. Germany grew at a perky 2.9 per cent in 2006.

Backing up the government's five-member advisory council's report, the managing director of the German Banking Federation, Manfred Weber, said, "The efforts of the political elite, companies as well as both employers and employees in recent years have begun to pay off - especially with regard to the labour market."

While unemployment in Germany is forecast to continue fall, it is still expected to average about 8 per cent in 2008 despite signs of labour shortages in key sectors.

But with expectations that those arguing for a softening of the Schroeder programme will succeed, Germany's latest flirtation with economic reform appears to be coming to an end.

"A couple of years ago there was a genuine consensus that this country needs reform," German government spokesman Ulrich Wilhelm told the daily Die Welt. "That consensus is gone. No-one is left to advocate further steps."

DPA

Subject: German news

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