Parliament Approves Sweeping Economic Reforms

While the reform package received overwhelming support across party lines, opposition leaders said the reforms did not go far enough to cure the country’s ailing economy.

“The boiler remains under pressure,” Guido Westerwelle, the leader of the business-oriented Free Democrats said before the vote. “This is a good start, but it’s not much more than that. It’s a reform trail at best, but this country needs a reform road.”

Top opposition leader Angela Merkel, who heads the conservative Christian Democratic Union, agreed. “Today cannot hide the fact that the real reforms still lie ahead,” Merkel said.

Less taxes, less welfare

Starting in 2004, German tax payers will have an additional €15 billion in their pockets as a €6.1 billion tax cut had been previously approved. Although the tax cut will take effect in two weeks, many Germans might have to wait until April to receive more money as companies will have to adjust their employees’ tax records. A familiy with a household income of €30,000 will pay about €568 less in taxes per year.

Parliamentarians agreed to reduce subsidies for home-owners and commuters to help pay for the tax cut. They also approved a bill requiring welfare recipients to accept any legal job offered to them or face a cut in benefits, as well as loosening measures protecting workers from getting fired.

During the parliamentary debate, the chancellor had tried once more to sway opponents of the reforms. “It’s better to enter the work force with less protection from getting fired than being excluded with a lot of protection,” Schröder said to applause from members of the opposition.

Government fails to secure own majority

Schröder’s governing coalition failed to secure a majority for the welfare reforms from its own ranks, however. Prior to the vote, several parliamentarians had already announced that they would vote against measures relating to welfare recipients and protection from getting fired.

The voting record by name will not be announced until Friday afternoon.

Prior to the vote, Bavaria’s conservative premier Edmund Stoiber (photo), who was the opposition's chancellor candidate during the 2002 election, said Schröder would have to step down if his own coalition did not manage to support the reforms.

Upper House approve reforms, blocks budget

As expected, Germany’s upper house, the Bundesrat, also approved the reforms. But in an unrelated matter, the chamber, which is dominated by the opposition Christian Democrats, rejected Germany’s 2004 budget as well as a supplementary budget for 2003, which calls for €43.4 billion in new debt.

The move can only delay adoption of the budget, as the government will be able to pass it with majority in the Bundestag. A spokesman for the ministry of finance called the decision “irresponsible,” saying that it would block investments needed for economic recovery in the coming months.