Parties to decide on German agreement

Posted in Europe | 14-Nov-05 | Author: Judy Dempsey| Source: International Herald Tribune

Leader of Christian Democratic Union (CDU) and Chancellor designate Angela Merkel addresses delegates during an extraordinary CDU congress at their headquarters in Berlin.
KARLSRUHE, Germany Already under heavy fire from critics on the left and right, Germany's conservative and Social Democratic leaders face their first big test Monday as they ask their parties to support a coalition agreement and government to be led by Angela Merkel.

Agreed upon last Friday after both sides had made big concessions, the 191-page coalition accord is designed to reduce the budget deficit, spur economic growth and reduce unemployment. The coalition hopes to do this through a combination of longer hours for workers, reduced subsides, higher sales taxes, new taxes on the wealthy and a freeze on pensions.

But the agreement has already been sharply criticized by both conservatives and Social Democrats, with conservative critics saying the reforms are inadequate and Social Democrats saying they go too far.

"This is not a love match but a very sober marriage of convenience," said Matthias Platzeck, who will be elected chairman of the Social Democrats at the party congress in Karlsruhe.

Merkel, 51, who received only 35 percent of the vote in September's parliamentary elections, needs full support for the accord from her Christian Democrats and its sister party in Bavaria, the Christian Social Union. And she is also dependent on the Social Democrats, who will play a major role in the grand coalition, running eight ministries, including those for labor and finance.

If it is endorsed by all the parties, the accord - called "Together for Germany: Courage and Humanity" - will be formally signed in Berlin on Friday, and Merkel, who is seeking to become Germany's first female chancellor, will be elected by the Bundestag, or German Parliament, on Nov. 22.

Merkel will face her party's leadership at a reunion in Berlin on Monday. With few exceptions, support for the coalition agreement is expected.

Friedrich Merz, the Christian Democrats' finance expert who was marginalized by Merkel during a power struggle, denounced the agreement, saying it failed to introduce a thorough reform of the tax system, which Merkel promised during her election campaign.

"I simply cannot recognize the influence of the Christian Democrats," Merz told the weekly Frankfurter Allgemeine Sonntagszeitung. "We are paying a damned high price for the chancellery."

Merkel's Christian Social ally, Edmund Stoiber, who negotiated the economic section of the coalition agreement, will face his party colleagues Monday at a meeting in Munich. Because at the last moment he chose not to take the job of federal economics minister and decided instead to remain premier of Bavaria, he has faced sharp criticism from his own ranks.

There was also criticism and disappointment from industry. Dieter Hundt, president of the Employers' Association, said measures agreed upon by the conservatives and the Social Democrats were counterproductive for the labor market.

"The fact that the grand coalition is settling down to work with plans for a drastic tax hike will have negative consequences for economic growth and employment in Germany," Hundt said.

Industry had wanted Merkel to go much further in cutting non-wage labor costs by channeling revenues raised from the higher sales tax into reducing labor costs.

The change in the sales tax, which is to be increased by three percentage points from 16 percent to 19 percent under the agreement, is not to become effective until 2007 and would raise 18 billion, or $21 billion, a year. Part of the revenues will be used to reduce the budget deficit.

Despite the criticism, Merkel said, "I foresee that Germany should in 10 years' time be able to say it is back among the top three countries in Europe."

Franz M√ľntefering, who this week will step down as party leader of the Social Democrats but will be vice chancellor and labor minister in the new government, is facing an ambivalent reception in his own party. During their election campaign, the Social Democrats promised not to raise the sales tax or change the law for hiring and laying off workers. But under the coalition accord, probation time for new employees can be extended from six months to two years.

"I expect a few serious rows Monday in Karlsruhe," said Ute Vogt, deputy leader of the Social Democrats. "But in the end, the party will rise to its duty."

Gerhard Schröder is expected to give a rousing endorsement of the coalition accord Monday when he gives his last speech as chancellor to his party.