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New German govt makes cutting unemployment top aim
(Reuters)
Updated: 2005-11-12 10:13
Germany's Christian Democrats and the Social Democrats have made fighting
high unemployment the centerpiece of their grand coalition agreement, according
to a draft of the 145-page document obtained by Reuters on Friday.
The two main Germany parties completed a deal earlier on Friday to form a
government after a month of talks and plan to release the agreement on Saturday
in Berlin.
"Reducing unemployment is the central obligation of our government policies,"
the coalition pact says in its preamble.
The country's unemployment rate, well above 10 percent, is described as the
main challenge facing Germany.
"Unemployment, state debt, an aging population and pressures resulting from
globalization require tremendous political efforts to ensure prosperity for the
current and future generations," the first line of the agreement reads.
Outgoing Chancellor Gerhard Schroeder took office seven years ago with a firm
pledge to cut unemployment or not deserve a second term. Unemployment rose
further but he won re-election.
Germany's traditional rivals sealed the agreement to create a government
under the leadership of conservative Angela Merkel eight weeks after an
inconclusive general election on September 18.
But the new government, the second "grand coalition" in post-war history and
39 years after the first one that lasted only three years, will be able to
operate without crippling opposition from the Bundesrat upper house of
parliament, which has blocked reform efforts by previous governments.
The conservatives and the SPD have bridged differences that bitterly divided
them during the campaign and recent decades.
At the heart of the deal is an agreement to bring Germany's ballooning budget
deficit back within European Union borrowing limits by 2007 -- a colossal
challenge requiring upwards of 35 billion euros in savings or extra revenues.
A good chunk of that sum will come from higher taxes. The parties agreed on
Friday to a controversial 3 percentage point hike in value added tax (VAT) in
2007, an idea championed by the conservatives during the election campaign.
In return for agreeing to the VAT hike, the SPD secured conservative
agreement for a so-called "rich tax," which will take the rate for Germans
earning 250,000 euros or more up to 45 percent from 42 percent previously.
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