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Berlin upbeat onreform compromise

9 December 2003

BERLIN – Germany’s government was upbeat before final negotiations on Wednesday with opposition to tax, labour and welfare reforms aimed at lifting the country from its economic malaise.

“I am optimistic – we will do it. … we face difficult but resolvable problems,” said Hennig Scherf, leader of the city-state of Bremen, who chairs the parliamentary committee seeking to hammer out a compromise.

Scherf also joked that he was optimistic because leaders taking part were “well-rested.” This could be crucial as the marathon talks will probably last through the weekend, officials say.

A top member of Chancellor Gerhard Schroeder’s Social Democrats (SPD), Scherf is one of the party’s most skilled mediators and highly regarded by the opposition Christian Democratic alliance (CDU/CSU).

Opposition chiefs also expressed hope for the talks, but kept up their poker faces in a bid to extract more concessions from the government.

“It all depends on what comes out at the end,” cautioned Christian Wulff, Lower Saxony state’s CDU prime minister.

Schroeder’s left-leaning government won approval for tax cuts, labour reforms and unemployment benefit reductions in parliament’s lower chamber, the Bundestag, earlier this year.

But last month the opposition CDU/CSU dominated upper house, the Bundesrat, sank the legislation.

Conservatives demand deeper labour market liberalisation as well as far less borrowing to fund next year’s income tax cut. Talks aimed at compromise legislation have so far made little progress.

A government official, with close links to the CDU, said agreement on tax cuts was almost certain.

“The public expects this and there’s no way the CDU wants to be blamed for blocking it,” said the official speaking on the condition of anonymity.

But how much of the remaining reform package will survive is an open question.

“The result is clear: both sides will compromise right down the middle. But whether this will do any good is another question,” said the influential Frankfurter Allgemeine newspaper.

Even though the German economy is expected to revive somewhat during the final quarter of this year, economists still predict zero growth for 2003 in what Finance Minister Hans Eichel admits is a third year of stagnation.

Unemployment at 10 percent is expected to rise during the winter.

Subject: German news