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Business

Schröder Presents 'Blueprint' for Labor Reform

The chancellor told Germany’s parliament on Thursday that he has a "blueprint" for reforming the country’s tangled labor market. But differences are emerging before the ink is even dry.

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Chancellor Gerhard Schröder says the economy will grow as much as 3 percent next year

Chancellor Gerhard Schröder did the expected Thursday and placed his support firmly behind a revolutionary labor reform proposal that has been winning him badly-needed points with voters.

The ruling Social Democrat chancellor, who has been accused of not doing enough to alleviate Germany’s hefty unemployment problem, praised the as-yet-finished proposals of the Hartz Commission, which aim to halve unemployment within three years.

"It is not an exaggeration to say that what we have is nothing less than a blueprint for more employment, individual initiative and security," Schröder told Germany’s upper legislative chamber, the Bundesrat, on Thursday.

The proposals of the commission, headed by Schröder friend and Volkswagen director Peter Hartz, seek to streamline the job search process for the unemployed, place a greater emphasis on temporary work agencies and give higher tax incentives to the self-employed.

Though the report is first due on August 16, details have already been leaked and quickly championed by Schröder. With unemployment steady at around 3.95 million according to June figures and his Social Democrats still behind in the polls, the chancellor is eager to appear reform ready.

But many, including Hartz, fear dragging the plan into the election campaign will dash any hopes of it becoming a reality.

How good ideas go bad

After initially supporting the plan, the Christian Democratic Union's (CDU) economic policy pointman in parliament and possible future economics minister, Lothar Späth, has come out against it. The Union and its Bavarian sister party, the Christian Social Union, along with joint chancellor candidate Edmund Stoiber, are dead against supporting anything that could win Schröder points.

The chancellor has begun narrowing the gap that separates him and the Union bloc in public opinion polls since talk of the Hartz plan surfaced. But a recent poll in the newsmagazine Der Spiegel showed that only 27 percent thought the Hartz plan would give Schröder’s campaign a boost.

The Hartz Commission is a "good show," said Friedrich Merz, the parliamentary group leader for the CDU and CSU who has also been suggested as a federal finance minister if the bloc wins a majority after September 22. "But it’s still a show."

Schröder nevertheless is bent on bringing the Hartz plan into effect, somehow, before the national elections.

Strange bedfellows To do that, he needs the support of both industry and the unions, who he is depending on for votes. Both have shown themselves supportive, but to varying degrees.

Industry leaders have said the Hartz plan is a step "in the right direction" but, like many, prefer to wait until the complete report is finished. Michael Sommer, chairman of the German Trade Union Association, said he is "ready to discuss" the proposals and saw "positive starting points."

But the two sides have already begun to disagree on a Hartz plan to reduce unemployment payments after one year and cut them off completely two years, leaving the unemployed depending solely on welfare checks.

Dieter Hundt, president of the German Employers' Association said in an interview with the Frankfurter Allgemeine Zeitung newspaper Thursday that the money should be cut off after one year.

The unions are dead against the idea, and their leaders will tell Schröder likewise when they meet with him Friday. The unions are generally supportive of the proposals, but say there is much work yet to be done.

Those on the commission seem to agree, and they are getting annoyed that Schröder has decided to throw the proposals into the campaign ring before they are fully developed.

Hartz said that, when they are released, the proposals could be brought into effect by any party, "no matter who governs."