EU Finance Minister Hans Eichel met his European colleagues in Luxemburg Monday to discuss high oil prices. But with a new government preparing to take its seat in Berlin, the powwow was perhaps Eichel's last.
Has time run out for Finance Minister Hans Eichel?
Euro-zone finance ministers met Monday to discuss ways to control the economic damage from raging world oil prices. But during the course of the day it became clear that Germany -- the euro-zone’s largest economy -- would be sending a new representative to future meetings.
The daily Hannoversche Allgemeine Zeitung reported on Monday that Eichel had been told he would not be asked to keep his cabinet post under the newly agreed “grand coalition” government of Christian Democrats and Social Democrats. Names of possible replacements are currently being bandied about, including North Rhine Westphalia SPD party chief Jochen Dieckmann.
As for Eichel, the end of his tenure comes after nearly six years of headline-making controversy. He replaced Oskar Lafontaine as finance minister in April 1999, promising to decrease the federal deficit. But he will leave his job with an overall budget deficit of some 1.45 billion euros ($1.77 trillion) – the largest in German postwar history.
Out with the D-Mark, in with the euro
Eichel’s exit reflects not only the change of government, but the longstanding dissatisfaction of SPD leadership with his results. The man responsible for Germany’s budget made frequent negative headlines for his supposed cost-cutting lists and an inability to meet EU budget criteria aimed at keeping the euro stable, which call for member states to keep their budget deficits below 3 percent of gross domestic product.
Yet despite putting into place measures that were unpopular with the public, but deemed necessary by experts -- including overseeing reforms which reduced some welfare benefits -- the country’s financial woes seem only to grow.
Eichel always tried to put positive spin on dismal statistics, but in May he admitted it was becoming "more and more difficult" to bring the deficit back within EU stability limits. Germany has been in breach of the three-percent limit for the past three years.
Taxes, budget cuts, reforms
The problem for the government is that slow growth and high unemployment continue to tear big holes in the public finances. The country suffers from double-digit jobless rates, and growth continues to hover between minus 0.2 percent and 1.6 percent. The annual budget for 2006 shows a 54 billion euro deficit, in an overall budget of 256.5 billion euros.
Among Eichel’s legacies are a three-tiered income-tax reform aimed at helping individuals and small businesses, as well as a much debated “eco-tax” which raised gasoline prices in order to support public retirement funds. His tenure also saw the implementation Hartz IV, a scaled-down -- but nonetheless controversial -- set of reforms aimed at trimming Germany’s generous social welfare benefits.
One of Eichel’s earliest tasks was leading Germany through the switch from its national currency, the deutschmark, to the euro. The official switch took place on Jan. 1, 2002. Among his last jobs is trying to slow the currency's continuing rise against the dollar, since he believes a euro which is too strong can stunt economic growth in Europe.