Schröder to Outline Next Phase of Reform

German Chancellor Gerhard Schröder has hinted that he's willing to consider new programs to boost his country's ailing economy ahead of a summit with opposition leaders to discuss the matter next week.

Opening Hanover's international IT trade fair, CeBIT, on Wednesday, German chancellor told executives that Germany was counting on the high-tech sector to help revive stalled economic growth.

"The information and communication industry has become an important growth engine for Germany and the global economy," Schröder said. He has hinted that his government could introduce new measures to boost the economy, but has so far not named specific project. According to news reports, all cabinet members have been asked to come up with suggestions.

IT as Germany's saving grace?

The recovery of the IT sector could be an important card in Schröder's hand as he attempts to pacify and convince conservative opposition leaders next week that his Agenda 2010 reform plan is on track and will bring dividends in the future.

After a dismal three years prompted by the collapse of the so-called new economy, the German computer, telecommunications and new media association BITKOM revealed ahead of the CeBIT trade fair that the worst appeared to be over.

"The information and communication sector is showing healthy economic growth and creating new jobs," BITKOM chief Willi Berchtold told reporters. "People are delighted with modern technology again. They are thrilled with new devices that are useful and fun."

German high-tech sales are set to rise 3.4 percent in 2005 to €135.2 billion ($180.7 billion) and another 3.1 percent in 2006, according to the group. CeBIT is expected to draw 500,000 visitors and help trigger renewed excitement for the high-tech sector after the lengthy slump.

Chancellor to push growth-inducing measures

Schröder assured the executives at the CeBIT that everything would be done to maintain an atmosphere in which the industry could continue to prosper.

"We will improve the growth dynamic with additional measures," he said. "I will present the concrete proposals in the German Bundestag next week."

Schröder will meet with Angela Merkel, the leader of the Christian Democratic Union (CDU), and Edmund Stoiber, who heads the CDU's Bavarian sister party, the Christian Social Union (CSU), on March 17 for a "job summit" to talk about strategies to tackle the nation's record-high unemployment rate. Foreign Minister Joschka Fischer, Schröder's vice-chancellor, will also attend the talks.

"We will then see whether the opposition is ready to take up its responsibility," Schröder told the trade fair audience.

Disagreement going in

But signs of compromise between the government and the opposition are hard to find. In a debate in the lower house of parliament, the Bundestag, on Thursday, both sides again expressed their willingness to continue reforming the German economy and to attend next week's "job summit" with an open mind. But the agreement basically ends there.

The ruling coalition of Social Democrats and Greens has rejected the ten-point program by the conservatives aimed at reducing unemployment that is part of the opposition's so-called "Pact for Germany." It would cut unemployment insurance premiums, make firing employees easier, cut bureaucracy and loosen some rules around industry-wide wage contracts.

In the Bundestag on Thursday, Christian Social Union (CSU) leader Angela Merkel said that with the plan, Germany could be "could be lead out of its numbness" and that with 5.2 million unemployed and an expected growth rate of one percent, there was no question of simply continuing on the present course. She said Germany need far-reaching reforms.

"What we definitely won't support is a stop-gap program aimed at stimulating the economy by making new debts," Merkel said. "What we really need are the types of structural changes proposed in our pact for Germany."

The SPD and Greens, however, called the so-called pact pure party politics and said its proposals were nothing but "stale recipes."

Schröder is said to be willing to go some way towards conservative plan regarding tax cuts for companies, but Social Democratic leader Franz Müntefering said he wants labor rights left alone.

The chancellor's meeting with the opposition comes two years on from the launch of the Agenda 2010 package of reforms to Germany's welfare, pension and health care systems and labor market.

Popularity boost needed ahead of election

Schröder's speech is also intended to boost the waning popularity of his Social Democratic Party (SPD) ahead of the key regional election in one on Germany's key industrial areas, North Rhine-Westphalia, in May and a general election in 2006.

The chancellor and the SPD have both taken a battering in terms of popularity of late, particularly after the introduction of labor market reforms at the start of the year which cut benefit for the long-term unemployed and made it harder for them to turn down available work.

The changes have swelled the unemployment total by some 370,000 by including in the statistics people previously not counted even though they were out of work.