Schröder Defends Reform Agenda

Saying that Germany's future success depended first and foremost on the education of its children, the Social Democratic chancellor asked Christian Democrats to support the abolishment of a subsidy for homeowners that's no longer necessary as Germany isn't suffering from a housing shortage and put the money into the education sector instead.

"I ask you to invest this money, which is no longer needed as a subsidy, in the future of our country," Schröder said. He added that this could free up about €4 billion ($4.85 billion) the federal and state governments could invest in education. Municipalities would also receive about €700 million that they could use to improve child care.

Christian Democrats, who would have to back such a shift in the parliament's upper house, which they control, have so far opposed abolishing the subsidy completely.

The chancellor also expressed his support for a proposal to sell some of Germany's gold reserves and use the money for education and research funding. "Investing in research and development is vital for a country that relies on technology like ours," Schröder said.

Schröder took to the floor of Germany's lower house, the Bundestag, to spell out his government's legislative agenda for the remaining two years of its term. But his speech was also an attempt to rally public support for painful economic measures and welfare cuts that have caused his Social Democrats to slump in opinion polls to all-time lows.

Earlier, Schröder had defended his government's social welfare and labor market reforms, saying that they were already showing results.

"Today, Germany is doing much better than it was 12 months ago," he said, adding that the German economy would grow for the first time in three years in 2004.

New EU measures to combat terrorism

Schröder also said he believed Germany's opposition to the war in Iraq had been the right decisions. "We did the right thing back then and we're doing the right thing today," he said, adding that 7,000 German soldiers were participating in peacekeeping missions around the world.

Referring to the fight against terrorism, the chancellor said he supported greater cooperation between security agencies in Europe. He added that EU leaders were planning to adopt new measures to combat terrorism at their meeting later on Thursday.

Christian Democratic leader Angela Merkel criticized Schröder's speech, saying that he had failed to present any new proposals to deal with the country's problems. While she said that Schröder's resignation and new elections would be the best thing for Germany, Merkel offered to participate in further reform plans.

She added that Christian Democrats were willing to talk about far-reaching tax reforms. "We're ready to begin negotiations tomorrow," Merkel said.