Newspaper article The Christian Science Monitor

German Leadership in Trouble over Economic Pact

Newspaper article The Christian Science Monitor

German Leadership in Trouble over Economic Pact

Article excerpt

FOR German Chancellor Helmut Kohl, it has been largely downhill since reunification.

This winter, he is in trouble again, getting very little cooperation for his "solidarity pact" - an enormous cost-cutting effort involving the federal government, the 16 state governments, unions, and industry.

The pact is to pay for economic recovery in east Germany, an undertaking made even more difficult by recession in the west.

During the reunification process, when the western economy was booming, Chancellor Kohl didn't have the fiscal worries he has today: a shortfall in tax revenues and an increase in unemployment benefits.

To compensate, the government will be borrowing again, ratcheting up the federal deficit by 10 billion deutsche marks ($6.37 billion) this year.

Last week, Kohl presented his pillar in the solidarity pact: tax increases and proposed savings in government spending. It fell flat.

The opposition Social Democrats branded it "sinister and antisocial," saying it cut too deeply into social benefits. Kohl will need the Social Democrats' support to get the financial package through the Bundesrat, the upper house of Parliament where the Social Democrats hold a majority.

Only industry appears ready to play the solidarity game, and on Monday pledged to increase investment in east Germany this year by 20 billion deutsche marks ($12.74 billion) - but only if trade unions hold back on wage demands.

The solidarity mega-deal was supposed to be completed by Christmas, and its delay is just another confirmation to the average German that the politicians in Bonn are incompetent. According to a poll published by the news weekly Der Spiegel Jan. 18, 51 percent of Germans have little trust in the country's established parties, and 38 percent have no trust whatsoever.

Germany's leaders are wondering whether this attitude will play itself out the same way it did in the American presidential elections, where the older generation was swept out in favor of the younger. …

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