Dispute over Reforms Continues Ahead of SPD Congress

In March, Schröder announced a package of sweeping reforms called “Agenda 2010” that aims to revive flagging German growth and shore up the country’s creaky social security system.

But the planned cuts to welfare benefits and loosening of job protection rules have encountered massive criticism from trade unions and the left-wing faction of the Social Democratic Party (SPD).

That forced Schröder to give in to demands from the SPD’s grassroots for a party congress on June 1 to discuss the reforms. The event has effectively been turned into a vote of confidence, since Schröder has indirectly threatened to resign should the party not back his reform course.

“It’s about important, perhaps even historic, decisions,” Schröder told the German news agency DPA in an interview.

At the heart of the reforms are proposals to cap unemployment benefits at 12 months and make it easier for small firms to hire and fire new workers. But Agenda 2010 has opened up a nasty split within his party, as left-wing hardliners have accused the chancellor of abandoning the SPD’s social democratic roots.

But Schröder has linked his political future to the unpopular reforms, seeing little alternative amid stalling growth and rising unemployment.

In recent years, Europe’s largest economy has ground to a halt under the weight of its generous welfare system, constricting labor market policies and the global economic downturn. Economic growth slowed to only 0.2 percent in 2002 and gross domestic product actually shrank in the first quarter of this year. German unemployment is running at over ten percent.

Majority likely

Ahead of the weekend party congress, some of the left-wing remained determined to force changes to the government’s proposals. “On Sunday we will introduce quite a few motions for modifications,” SPD regional leader Claus Möller told DPA. But a consensus also started to build that Schröder would achieve the necessary majority from the SPD delegates.

“I see that the longer the discussion has been the greater the conviction has become that Agenda 2010 must and can be supported,” SPD deputy parliamentary leader Ludwig Stiegler told ZDF television on Friday. “Therefore I expect that in spite of all the criticism over specific details, we will get a very clear majority.”

But even with the general backing from his party, Schröder will still have worries about passing his reform plans in parliament. His center-left coalition of Social Democrats and Greens has only a razor-thin majority in the lower house of parliament, the Bundestag, and the conservative opposition controls the upper house the Bundesrat, which represents Germany’s federal states.

The conservatives have signalled partial willingness to support necessary restructuring of the welfare system, but are reserving outright support for the legislative initiative until the SPD commits itself entirely to the reforms.

“Nobody knows what the SPD really wants. They expect us to say ‘yes’ to that what we haven’t seen and that is just not on,” said Christian Social Union General Secretary Thomas Goppel.