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Germany

Schröder defends economic policy

Germany’s chancellor recommends no sudden change of course, despite market downturn.

Pressured by news that Germany’s economy teeters on the brink of recession, and by opposition politicians quick to use the news to their advantage, Chancellor Gerhard Schröder offered a spirited defence of his economic policy.

Presenting his views on the 2002 budget to the parliament, Schröder said that his government’s preferred course of austerity was crucial, because it has kept Germany within the deficit limits enshrined in the Euro-zone’s stability pact.

There is “no viable alternative,” he said.

Government spending, he proposed will increase only moderately in 2002, by 1.5 per cent, to DM 247.5 billion.

This moderate rate in budget growth, which the government surely hopes will by exceeded by overall economic growth, is partly the result of Schröders “consolidation” policy for state institutions.

Without consolidation, he told the parliament, this year Germany would have exceeded the Euro-zone deficit limit by DM 30 billion. Staying on the right side of that mark is essential for Germany, as the biggest economy in the Euro-zone, which launches its fully unified currency system upon the new year’s arrival

Opposition rebuffed

Opposition parties got a strong rebuff from Schröder.

The chancellor said the Christian Democratic Union and its partners in the Christian Social Union (CDU/CSU) have no viable alternative, while they struggle to conclude a long-running hunt for a chancellor candidate before next year’s election.

But he faced heavy criticism, nonetheless, from opposition parliamentarians who accused the government of failing to stimulate the economy and thus risking recession.

The chancellor defended himself, asserting that sudden policy changes and gimmicks are poor instruments for steering a national economy. He prefers a “steady hand”.

But how steady

Some would say too steady a hand. A particular point of criticism is flexibility of Germany’s employment laws, which can make hiring and firing a complicated process.

“Flexibility is a lovely word,” Schöder said, briefly flashing the Social Democratic ideological credentials that many would say he tones down to appeal as a centrist politician.

“Look at what flexibility can involve: ending protection from termination. You are asking this in a time when big firms are making wide-scale losses. You want to make employees into dependents.”

With issues like this at the fore, and Germans anxiously awaiting more news about the state of their economy, the country’s political campaign season is already at hand.

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