Gerhard Schroder, the German chancellor, struck a landmark deal with the conservative opposition on Monday, paving the way for the most ambitious package of economic reforms since the country’s reunification, according to economists. However, Germany will probably not be able to keep the budget deficit under 3 per cent of gross domestic product in 2005, as it pledged to the European Commission.
The reform package includes about 15 bills. They would toughen criteria for receiving social benefits and cut taxes:
“As far as fiscal policy is concerned, things look relatively neutral. The measures are unlikely to raise potential growth,” says Jurgen Michels, economist at Citigroup. However, the reform measures “show German politicians are not just capable of talking about reforms, they can also enact them.”
Source: Mark Landler, German Leader and Opponents Compromise on Economic Plan, New York Times, December 16, 2003, and Bertrand Benoit and Hugh Williamson, Schröder and opposition strike landmark reform deal, Financial Times, December 15, 2003.
For NYT text (requires Times subscription)
http://www.nytimes.com/2003/12/16/international/europe/16GERM.html
For Financial Times text (requires ft.com subscription) http://news.ft.com/s01/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1071251550233&p=1012571727088
For more on International (Unemployment and Labour Market Regulation) http://www.ncpa.org/iss/int/
FMF Policy Bulletin/ 6 January 2003
