Schröder Defends Reform Package to Parliament

Schröder came out fighting as the Bundestag started a general debate on his proposed reforms that aim to revamp the welfare state and kick-start the moribund economy. He called on the conservative opposition not to block the reform plans of the ruling center-left coalition.

“There is a responsibility that the opposition also has to face and cannot avoid,” he told parliamentarians, referring to the conservatives’ ability to torpedo part of his agenda in the upper house of parliament the Bundesrat.

The Agenda 2010 is made up of 10 bundles of legislation designed to revive Europe's biggest economy. It includes tax cuts and measures to paring down the country’s extensive social security system. Although Schröder has more or less managed to get his own coalition of Social Democrats and Greens behind the reforms, he can expect a tough three months of negotiating and compromising as left-wing MPs try to tinker with the package before voting them through.

But with only 306 out of a total 603 parliamentarians belonging to the ruling coalition, Schröder faces a slim majority in the Bundestag. Should just four of his colleagues defect, the dream of passing at least some of Agenda 2010 will die. The plans have already caused outrage in the left wing of the SPD, who have accused their leader of betraying Germany’s social tradition of protecting workers. And even if Schröder manages to get his own backbenchers on side, he will need even more luck in the coming months to get his reforms through the upper house unscathed.

Reviving Germany

Trying to rally support for as much of Agenda 2010 as possible, Schröder’s speech on Wednesday covered a lot of ground. Beside pushing the opposition for their support he also touched upon renewing the country’s welfare state and the government’s planned budget for 2004, which was presented on Tuesday.

The health care system, long famous for its high standards, is currently weighted down by spiraling costs and an aging population. Under Schröder’s proposed reforms, monthly contributions will sink, but government "sick pay" will be struck from the benefits list, forcing Germans to take out separate insurance policies to cover them for illness-related pay losses. Reforms to the health-care system are designed in part to lower Germany’s labor costs, which are among the highest in the world.

Also attracting protest are Schröder's plans to bring forward €15 billion ($16.8 billion) in tax cuts, the prospect of which analysts say contributed to improved business confidence in August. While the cuts are designed to revive Germany’s depressed economy, opposition Christian Democrat (CDU) politicians have been quick to criticize the planned method for financing them: increased public borrowing.

Even Schröder's own finance minister, Hans Eichel, has admitted that new borrowing could well edge Germany’s budget deficit over the 3 percent euro zone ceiling. “We will try and ensure we manage to stay within the limit,” Eichel said. “But it’s extremely difficult, although I’m not saying it is impossible.”

Conservatives control upper house

The conservatives have announced they will use their majority in the Bundesrat – which represents Germany’s 16 federal states – to sink any legislation not to their liking. So even if Schröder manages to run the Bundestag gauntlet successfully, he is unlikely to escape making concessions when his bills enter the upper house.

Speaking for the conservatives on Wednesday, Michael Glos told parliament that the ruling coalition was to blame for the country’s current state and that the opposition could not be held to account.

“Those that are at the helm of this land are the ones responsible for this decline,” he said.

But Karl-Heinz Nassmacher, a political scientist art the University of Oldenberg, believes Schröder will weather the coming storm. “Schröder will keep his head out of the noose as he always does. He knows he won’t get all the 10 laws through, but as there are so many he has room to bargain,” he told Reuters. “He’ll emerge the victor as long as he gets something approved by parliament. That’s what governing in Germany is like.”