Schröder Unable to Quell Opposition to Reforms

Chancellor Schröder last month announced a package of sweeping reforms that aim to revive flagging German growth and shore up the country’s creaky social security system. But his “Agenda 2010” plan has encountered massive criticism from trade unions and the left-wing faction of his own Social Democratic party (SPD).

Schröder met top SPD officials at his home in Hannover on Thursday evening in what was billed as a routine strategy session. But in a brief statement to the press, the chancellor left little doubt that how to counter opposition to his reform proposals dominated the meeting.

“Anyone opposing their own party is playing with fire, because they are playing with the administration’s ability to govern,” Schröder said. “We are determined to implement Agenda 2010 – exactly how I presented it to the German Bundestag.”

Stakes are high

Making sure SPD backbenchers know just how high the stakes are set will be key in determining the government’s success in pushing through the painful welfare and labor market reforms, which would cap unemployment benefits at 12 months and make it easier for small firms to hire and fire new workers.

Despite the latest warning from the chancellor, the SPD left-wing on Friday still appeared prepared to use a special party congress on June 1 for a showdown over the reforms. The anti-reform party members argue the proposals will irreparably damage the German welfare state.

“I am convinced that continuing with the current course will over the mid-term lead to the loss of the government’s ability to act,” SPD left-wing hardliner Ottmar Schreiner told ZDF television.

Taking the battle to the SPD rebels, the government showed it was prepared to open a second front on Thursday, as a government-sponsored commission presented its reform suggestions for the German pensions system earlier than expected. At the core of the proposals are plans to have Germans work longer and receive smaller pensions.

Working longer

Bert Rürup, the head of the commission, said the retirement age should begin to rise to 67 from 65 after 2011. People who would retire early would be penalized. Echoing the line taken by the government, Rürup and the commission’s other experts said there was little choice but to implement the painful reforms in order to preserve Germany’s social security system.

As to be expected, the SPD left wing and trade unions immediately attacked the commission's recommendations.

"The Rürup commission proposals on the future of state pensions are a cold rejection of social justice and sustainable reform," said Ursula Engelen-Kefer, deputy head of the German Trade Union Federation.

Added to the anger over the proposed welfare cuts, a revolt over the pension proposals could present Schröder with an unpalatable choice. Unless he is able to get the SPD firmly behind his reforms, it is likely he will have to use the party congress in June as a quasi-confidence vote on his leadership.

But first he will have to weather rough days ahead, especially as the unions and left-wing hardliners use next week’s traditional May Day celebrations across the country to rally opposition to the reforms.