GERMANY: The German Chancellor, Mr Gerhard Schröder, has called for a "huge common effort" to get Germany back on its feet and announced reforms he hopes will cure the country's economic malaise.
Mr Schröder also used his long-awaited speech in parliament yesterday to call for a looser interpretation of the rules governing euro stability, prompting fears that Berlin will again overshoot the limits set by Brussels.
"To fulfil our German responsibility to and for Europe we have to be prepared to change," said Mr Schröder. "Either we modernise as a social market economy or we will be modernised by the unchecked forces of the market."
The Chancellor took nearly 90 minutes to present his reform route out of the economic slump, a mixture of social welfare cutbacks, loosening of the hire-fire laws and a €15 billion infrastructure investment programme.
The speech, delivered against a backdrop of stalled economic growth and over 11 per cent unemployment, trod carefully between Germany's powerful interest groups, praising and criticising unions and employers in equal measure.
But it was criticised by opposition, unions and employers afterwards for being too vague and full of old ideas.
Mr Schröder said his government's main tasks were to create new jobs, stimulate the economy and reduce rising taxes. To accomplish that, the German leader announced plans to "cut what the state provides, promote people's own initiative and demand that individuals contribute more by themselves".
To increase take-home pay and "get a grip on spending", he announced plans to merge social welfare payments with unemployment benefit and to cut the value and duration of dole payments.
"I reject the notion that people who want to work and can work have to draw welfare, while others who are not even looking for a job draw unemployment assistance," he said.
In the future, those under 55 will receive unemployment benefit for just 12 months, while those over 55 will receive it for 18 months.
With unemployment nearing a post-reunification high, Mr Schröder announced limited changes to legislation protecting workers from being fired, saying it would no longer automatically apply to small firms.
Anticipating union resistance to the move, he said: "Our country hasn't become strong through thoughtless 'hire and fire', rather through confident workers whose motivation is not fear, but the will to achieve something with hard-working companies."
To sweeten his bitter pill, Mr Schröder announced that the government would make available €15 billion in low-interest loans for an investment in the regions as a way of stimulating the depressed construction sector.
The German leader said he was determined to revive the German economy without new taxes or borrowing. However, he said European rules capping the budget deficits of eurozone member-states should be applied more liberally in times of economic hardship.
"We agree with our partners that we need the possibility to react to unforeseen events that may result from worsening crises," said Mr Schröder, referring to the looming war in Iraq.
He said Germany was committed to budget consolidation but said the pact offered greater untapped flexibility, of which Germany would take advantage.
Germany is struggling to keep its budget deficit this year under the limit of 3 per cent of gross domestic product set in the EU rules meant to protect the euro.
After huge build-up, Mr Schröder's speech to bring Germany back from the brink of recession was roundly dismissed yesterday. Ms Angela Merkel, leader of the opposition conservative CDU, said: "That is surely not a major master plan for the Federal Republic of Germany."
Union leaders said they were "bitterly disappointed" with the speech and would fight proposals to cut benefits for older workers made redundant. Employer reaction was similarly negative.