German coalition makes final push for major welfare reform

Germany’s ruling Social Democratic Party (SPD) is making a final push this week to exorcise the last traces of their disgraced ex-chancellor Gerhard Schröder and his controversial welfare reforms.

On Thursday the SPD and its Bundestag coalition allies – the liberal Free Democrats (FDP) and Greens – will back a new Bürgergeld (citizens’ income) system that boosts jobless welfare payments, particularly for families.

“In a crisis like this I am damn proud that we are on the side of the people, ensuring that those with less get a little something extra to help get them through,” said Lars Klingbeil, SPD co-leader, to a weekend party gathering.

The Bürgergeld system was the SPD’s central election promise last year. Keeping its promise a year on is clear boost for the party, its centre-left political voter base and chancellor Olaf Scholz.

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As federal labour minister in 2005, faced with an economic meltdown and soaring jobless rate, Mr Scholz was tasked with pushing through the little-loved “Hartz” system.

It pushed jobless Germans, after a year of income-linked dole payments, down to basic welfare of €449 a month for a single person, with additional allowances to cover rent, heat and other basics.

Among its most controversial element, welfare payments could be frozen or cut if, for instance, recipients could not prove they were seeking employment.

The reforms came into force and helped turn around the economy. But they hastened Mr Schröder’s political demise and triggered an SPD split that aided the rise of the hard-left Linke party.

After nearly 20 messy years – political in-fighting, election disasters and Mr Schröder’s disgrace as a Russian energy lobbyist – the SPD sees the new welfare system as a fresh start.

It will increase basic payments for singles to €500 a month; for a jobless couple with two teenage children, the basic monthly payment rises by a fifth to €1,800 with other allowances on top. The new system is also less strict on penalties and savings.

With Thursday’s Bundestag vote, the SPD starts the legislative clock on a package it hopes to have in place by January 1st. But that requires majority support of a federal states in the upper house, the Bundesrat. Spotting a political opportunity, the opposition Christian Democratic Union (CDU) and its Bavarian CSU allies have demanded major changes in exchange for their support.

They have criticised the end of the carrot-and-stick system of incentives and penalties for those who do not actively seek work.

“It’s completely absurd, when we have a shortage of skilled workers, that we no longer will have the possibility of motivating someone to take a job,” said Mr Markus Söder, CSU leader and Bavarian state premier.

Industry lobbyists and analysts have echoed their criticism. The industry-financed IDW economic institute has described the Bürgergeld system as “almost a universal social benefit without asking for anything in return”.

But traditional SPD allies – from unions to leftist economic institutes – have hit back at what they call “downward social envy”.

“Anyone who thinks that someone on €502 a month has a pleasant life should try it themselves sometime,” said Prof Gerhard Bäcker, a social researcher at the University of Duisburg-Essen.

The reforms come almost a year after SPD ended its three-term run as junior partner to CDU chancellor Angela Merkel.

Gathered in Berlin at the weekend, SPD delegates cheered news that the Lower Saxon SPD, after winning last month’s state election, had ended Germany’s final state-level alliance with the CDU in favour of a new coalition with the Greens.

Mr Hubertus Heil, federal labour minister, announced: “The grand coalition era is over.”

The planned welfare changes will come on-stream alongside additional cost-of-living measures agreed this month, including gas and electricity price caps and a €49 monthly national transport ticket.

These measures have been welcomed by Germany’s economic advisory panel which advises the federal government.

In its autumn report the panel recommends going even further, suggesting additional stimulus measures financed through a “time-limited increase of the top tax rate”.

That is music to the ears of SPD co-leader Lars Klingbeil. At last weekend’s gathering he promised that Germany is heading into “a new era of redistribution”.