Row Over Reforms

In a move that has caused alarm among reformists and economists in Germany, Kurt Beck, chairman of the Social Democratic Party (SPD) has said he plans to throw his weight behind a drive to let older unemployed people draw jobless benefits for a longer time.

The SPD is the junior partner in Angela Merkel's Christian Democrat-led grand coalition.

The move, which would amount to rolling back a key labor-market change introduced under former Chancellor Schröder, will mean extending unemployment benefits to 24 months for those over 50 years old and to 18 months for jobseekers older than 45. Schröder had these cut from 32 months to 12 months.

During this time, jobseekers are entitled to up 67 percent of their last salary, after which they become eligible for a flat-rate benefit of about 350 euros ($500) a month.

Campaign for social justice or clever ploy?

Wolfgang Thierse, vice president of the German parliament and a SPD member, said there was "huge support" for Beck's proposals in the SPD.

"The expectation that there are enough jobs for older people simply hasn't been fulfilled," Thierse said.

Hubertus Heil, general secretary of the SPD insisted that the changes did not mean the party was turning its back on the structural reforms started by Schröder.

"It's about showing respect for the work of people who have become unemployed and who today, find it as difficult as ever to find work again," Heil wrote in a newspaper article.

Such a signal would raise acceptance for reforms because it would correspond to the sense of justice felt by the overwhelming majority of the population, Heil wrote.

A similar attempt is underway in some quarters of the SPD to water down pension changes and review a law that raises the retirement age to 67 from 65. The pension law designed by Merkel was approved by parliament earlier this year and is designed to stem further rises in pension contributions shared between companies and workers.

The SPD is expected to discuss the divisive topics at a party conference later this month.

Beck's tactics are widely interpreted as an attempt to spur plummeting popularity ratings for his party and to appeal to disillusioned voters driven into the arms of a new opposition alliance of left-wing parties campaigning for more "social justice."

Recent opinion polls show almost three-quarters of Germans favor higher jobless benefits.

"Progress requires a step forward"

Though Beck's proposals have met with approval in parts of his own party as well as Merkel's conservatives, they are fiercely opposed by some as backsliding on crucial domestic reforms.

Franz Müntefering, labor minister and vice-chancellor and a member of the SPD is one of the strongest critics of tweaking Agenda 2010, the package of far-reaching labor-market and social reforms introduced by Schröder.

"I recommend my party to stick to the course," he said, criticizing the leftward drift of his party.

The SPD should not try to lessen the pace of reforms, he said. Müntefering drew up the law to increase the retirement age and helped devise Schröder's welfare changes.

"Progress requires a step forward, not backwards," he said.

The issue has also sparked alarm among economists and business groups who fear that a rollback of key structural reforms could put a dent in Germany's resurgent economy.

"The opposite of what we need"

"It goes in the totally wrong direction. Beck is torpedoing the upward trend of getting work among those above 55," Jutta Allmendinger, a labor market expert and head of the WZB Social Science Research Center in Berlin told German newspaper Der Tagesspiegel.

Wolfgang Clement, economics minister under Schröder and one of the architects of his structural reform program said undoing the labor-market reform would undermine efforts to raise the retirement age and destroy incentives for jobseekers to accept lower-paid jobs.

"This is exactly the opposite of what we need at this juncture, which is to encourage people to work longer in law and in practice," Clement told Financial Times Deutschland.