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Union Members Heckle Chancellor Ahead of Crucial Reform Vote

With his labor market reforms up for a vote on Friday, Schröder appeared before an unfriendly IG Metall audience. Having staked his political future on the reforms, he's hoping for a warm reception in the Bundestag.

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Chancellor Gerhard Schröder was not very warmly received at the trade union meeting.

In what was meant to be a final pep rally leading up to Friday's crucial vote on labor market reforms, German Chancellor Gerhard Schröder spoke before a crowd of IG Metall union members in Hanover on Wednesday night. The chancellor, who has been facing tough opposition to his reform package from both within his own party and across the aisle from the opposition Christian Democratic Union (CDU), made clear he didn't plan to offer concessions to the likewise recalcitrant union. This, obviously, did not sit well with the crowd, who booed and heckled him.

Schröder took a tough line. "I'm not here looking for approval," the defiant chancellor told 600 delegates from the engineering and metal workers union, many of whom are unhappy with his Agenda 2010 reform package. They feel it rolls back many of the protections traditionally afforded the German worker and undermines identity of the Social Democratic Party -- which Schröder leads -- as the worker's party.

"We will do what we need to do," said Schröder. "I don't have the audacity to ask for your support, and I know that's not what you want," he went on to say.

In his first speech since assuming the leadership role at IG Metall, Jürgen Peters responded on Thursday, taking an equally tough stance. He suggested that if his organization did not agree with the future direction of the SPD, they might well sever the decades long alliance.

Schröder in a tough position

On the eve of a vote in the Bundestag which will decide the future of German labor market politics, the weary chancellor's true adversaries -- with the political power to block his reform program -- are not necessarily the unions but the rebellious left of his own party and the conservatives in the opposition CDU. For a chancellor who has staked his political future on the successful implementation of a series of reforms -- including healthcare, pension, tax and labor market reform -- Schröder also knows he can't afford to suffer any more significant setbacks.

The package of reform legislation, known as "Agenda 2010," has come in waves. Healthcare reform was decided in September. The bills will continue to trickle through until the end of the legislative period in December. Following a close vote on the healthcare package, a new bundle of legislation concerned with labor market reforms (otherwise known as Hartz III and IV) is up for a vote in the Bundestag on Friday.

Last minute wrangling

The weeks leading up to Friday's vote have been tumultuous. During September's vote on healthcare reform, six left-wing members of Schröder's own SPD revolted and voted against the legislation. Thus, Schröder was robbed of his so-called "chancellor's majority" in the Bundestag, the lower house of Germany's parliament, where the SPD and its coalition partner, the Green Party, hold the majority of seats.

Schröder was so incensed, that he staked his political future on the implementation of "Agenda 2010," threatening to resign if he was unsuccessful. In this particular case, however, the revolt proved little more than a political embarrassment, as the ruling coalition had carefully negotiated the content of the healthcare legislation with the CDU prior to the vote and could therefore count on enough support from the opposition to carry them through.

Not so in matters related to labor reform. The CDU has its own ideas about how labor market reform should proceed, so every vote from the chancellor's own ranks will count this time around.

Schröder and high-ranking SPD officials do not want to see a repeat of the events of September. When earlier this month the same six left-wing party members threatened to once again go against the party line, it was enough to bring the party leaders to the negotiating table. A few last minute changes were the result.

The negotiated changes total 12 pages, with some technical points and others more substantive. Most significantly, the new wording now protects against wage dumping. Unemployed people will only be asked to take jobs that pay the local competitive wages. Among the other concessions: unemployed persons are not required to take a job unless they have secured childcare and single mothers with young children will get a subsidy.

What's it all about

Left-wing parliamentarians within Schröder's party have not been the only ones to voice concern over the nature of the labor market reforms. All told, the legislation will fundamentally change the nature of the German welfare and unemployment system.

Essentially, the legislation is comprised of two parts, the Hartz III and the Hartz IV laws, both taking their name from the special extra governmental commission-- headed up by the Volkswagen manager Peter Hartz -- that was set up to review the situation and propose changes.

Hartz III proposes a massive re-organization of the Federal Labor Office, remodeling it after private job placement agencies and renaming it the Federal Job Agency. The agency will be responsible for managing unemployment benefits and finding job placements for the unemployed. The agency will also have the power to dock the benefits of people who refuse the jobs offered to them, a controversial issue.

The Hartz IV law calls for merging the country's unemployment and welfare benefits into a new benefit called "Unemployment II." Germans will still be entitled to their old-school unemployment benefits, based on a percentage of their income, -- sometimes up to 50 percent -- though the length of time they can claim this benefit will be reduced from 32 months to 12 months thanks to legislation approved in September. After 12 months, the long term unemployed will switch over to so-called "Unemployment II." This new benefit will be based on the rate paid out to social assistance recipients, which is not related to former income levels and is significantly less than "Unemployment I" benefit.

Critics have charged that these laws could result in loan dumping, with highly-qualified professionals forced to take low-paying jobs or risk punishment. And they worry that the laws do not offer enough protection to the long-term unemployed, particularly older unemployment recipients.

Not an easy road ahead

The next few months will not be easy. If the legislation is approved by a majority in the Bundestag, which the last-minute negotiations seem to have secured, Schröder and his party still face a tough road ahead.

The legislation package will then move on to the upper house, the Bundesrat, which represents the states. There the Chritsian Democrats have the majority. CDU leaders have already suggested they will not support the current version of the reforms. "The law dubbed Hartz IV -- as it stands now -- will not get our support," said Roland Koch, Hesse's CDU premier. "Because it's not sufficient enough to solve our nation's problems, to create more work and more jobs and make sure that those who are capable of working do."

Premier Dieter Althaus of Thuringia, also a CDU member, said his party has plans of its own: "We will make our own suggestions -- in fact they have already been presented to the Bundesrat -- and I suggest that we look at both drafts and bring them closer together."

That is most likely what's going to happen. The Bundesrat doesn't have the power to overrule the legislation. But they can send it back to the Bundestag. Then, ever more delicate compromises will have to be hammered out in the two bodies' arbitration committee. So, for the next few months at least, the saga will continue. But all parties involved will have to reach some kind of agreement by December 19 -- when the legislative period ends -- if they want to implement the changes by January 2004.

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