Reform Rollback
November 3, 2007
Germany's Finance Minister Peer Steinbrück warned against going back on tough spending restrictions which have helped relaunch the economy, ahead of a crunch meeting of the ruling coalition on Sunday.
"This will not work with me," Steinbrück said, in an interview published Saturday, of the growing pressure within his center-left Social Democratic Party (SPD) for bigger social benefits.
Leaders of the conservative Christian Union alliance, which has governed with the SPD for the past two years, are to meet in Berlin on Sunday in a bid to overcome the crisis caused by SPD calls for an easing of spending restrictions.
Steinbrück, the chief architect of the recent success of Europe's biggest economy, told the Leipziger Volkszeitung regional newspaper that no-one "should believe that the lock gates can be reopened."
The newspaper interpreted his comments as being a threat to resign, but Steinbrück's ministry made it known that this was not the case.
Social Democratic demands
The heads of the rival parties in the left-right government are to discuss the SPD's demands for transport subsidies for workers, extra family benefits and more payments for the long term unemployed.
The finance minister fears that such measures could undo the reforms started by the previous government under the SPD's Gerhard Schröder.
Kurt Beck, the current SPD leader, emerged a clear winner at a party conference last month by emphasizing more traditional Social Democratic policies, such as the redistribution of wealth and a tighter social safety net for the poor and unemployed. The leftwards move was popular with party members, many of whom became disillusioned with Schröder's repositioning of the part in the center.
Chancellor Angela Merkel also warned "we must not undermine all that has been gained" in an interview with the Welt am Sonntag newspaper to appear Sunday.
The conservative Merkel, who has been accused by some of ignoring domestic policy, highlighted that budget consolidation and cutting unemployment remained her priorities.
Business worried
German business leaders are also worried about a possible change of policy. Although Beck called the SPD's new positions a "careful readjustment," German business saw it as a major shift.
"The change of mood in the SPD is unmistakable," Commerzbank analyst Eckart Tuchtfeld told the dpa news agency.
The head of the Federation of German Industry (BDI), Germany's main business lobby, warned against a "backwards somersault."
Unemployment is now at its lowest level in 12 years and is expected to go lower in 2008 while Germany could register a budget that balances revenue and spending next year.