GERHARD Schroder, the German Chancellor, arrived late at the G8 Heads of State summit at Evian earlier this week. This was not because he was trying to avoid a meeting with President Bush (who left early!) following their serious fall-out over the Iraq war, but because he had more pressing business to attend to at home. Although Germany's voice, as the third largest industrial power in the world, needs to be heard at the G8 meetings, Herr Schroder had first to fight for the support of his Social Democratic Party in implementing reforms that he believes are urgently necessary if Germany is to keep its place among the world's economic giants. Annual GDP growth has fallen from 2 per cent in 1998 to 0.2 per cent last year and unemployment has risen from 5.7 per cent in 1991 to 10.5 per cent last year. Both these indicators were the worst in Europe last year. Herr Schroder told more than five hundred delegates at an emergency party meeting in Berlin that welfare, unemployment and pension benefits will have to be reduced and a commitment to market-oriented reforms embraced. The implication was that the trade unions will have to toe the line. Although many observers had predicted that the Chancellor would not get his party's unequivocal support, in the end he received the endorsement he wanted from more than 90 per cent of the delegates. He now has to take his proposals to the parliament where he has only a tiny majority. Germany's overall economic situation is so shaky that an emergency alliance between Herr Schroder's party and the Christian Democrats cannot be entirely ruled out.


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