BERLIN, 9 September 2003 — Chancellor Gerhard Schroeder’s “Agenda 2010” economic reforms enter a hostile Parliament this week, heralding a battle that could make his confrontations with left-wingers and unions this year seem like a harmless tiff. Schroeder, who has demonstrated a knack for persuasion, arm-twisting and horse-trading, will need all those skills and a dash of luck to secure his own narrow majority for the measures and then get the conservative opposition to agree to them.
A total of 10 packages of legislation are on the table in the next three months, ranging from bringing forward 15.6 billion euros of tax cuts and cutting back the health service to lowering benefit payments for the long-term unemployed.
The Bundestag lower house begins a debate today on the 2004 budget, and on plans for health reforms where Schroeder has already reached a cross-party compromise. Further laws enter Parliament later in September and October.
Failure to get them passed would cost Schroeder his job and plunge Europe’s largest economy deeper into a crisis of confidence. It entered a recession in the first half of the year and recent signs of an upturn were based on hopes for tax cuts.
“I’ve never known a time that wasn’t hectic since we entered government, but what’s new now is that we have so many problems to solve at the same time,” said Michael Mueller, a deputy parliamentary leader of Schroeder’s Social Democrats (SPD).
The reforms are aimed at reducing German labor costs which are among the highest in the world. Schroeder wants to lower the cost of the welfare state, encourage firms to recruit and the jobless to seek work. “The world has changed,” Schroeder said in a television interview on Sunday. “So we have to adjust our welfare system to the changed state of the economy.” His reform plans have outraged left-wingers among his Social Democrats (SPD) and traditional trade union allies who have said the party was betraying its history of protecting workers.
Yet Schroeder managed to quash a party rebellion in June by threatening repeatedly to resign, winning overwhelming support from a special SPD congress. Trade union opposition, meanwhile, has waned after a campaign of protest got little public support. Economists and political analysts see no chance that Schroeder will get the whole package through parliament intact.
His absolute majority in the Bundestag lower house, at 306 out of 603 deputies, is so slim that only four deputies from his SPD or from the Greens, his junior coalition partner, would have to defect to rob him of it.
A number of Greens and SPD deputies have said in recent weeks that they want changes to the laws before they can agree to them, raising the prospect that Schroeder may water down his measures to avoid a defeat at the first parliamentary hurdle.
In the end, fear of losing power should restore discipline in his ranks, however. Assuming he manages to get the Agenda 2010 through the lower house, it still needs to be passed by the Bundesrat upper house representing the 16 federal states. The opposition conservatives have a majority here and are sure to demand maximum concessions.
Schroeder could try to outflank the opposition by persuading individual states to back his reforms with the offer of financial concessions — a tactic that paid off in 2000 when he secured the Bundesrat’s approval of tax cuts.
Compromises will be hammered out in the mediation committee between the two houses where a further danger lurks. The conservatives may insist on the SPD abandoning the system of collective wage bargaining in return for their agreement to Agenda 2010 — a demand Schroeder would find almost impossible to persuade his own ranks to approve.
Schroeder is likely to prevail, said Karl-Heinz Nassmacher, political scientist at the University of Oldenburg.