Kohl Launches Plan to Put Germany's Purse in Order

Across Europe, countries have been forced to trim cherished social welfare programs they regard as fundamental to their very civilization.

Now Germany, the largest economy in Europe, whose leaders once promised an economically painless absorption of former East Germany in a reunified country, is having to cut back.

Chancellor Helmut Kohl has presented to the Bundestag (the lower chamber of parliament) his government's "Program for More Growth and Employment," which calls for some 75 billion DM ($50 billion) in cuts in government spending at all levels.

Plan lacks consensus

The program is notable not only for the cutbacks, but for the chancellor's willingness to proceed without the traditional tripartite "consensus" of government, labor, and business.

"It was clear," he told the Bundestag Friday, "that there would be some things that could be decided by consensus and some things where each party would have to act according to his own responsibility."

This was strong language by German standards. Earlier in the week, a tripartite "chancellor summit" held to reach consensus on the government program had foundered; union leaders left the dinner meeting at midnight reporting "no deal."

The goal of the chancellor's program is an improvement in the business climate, specifically reduction in nonwage labor costs, to help create jobs. Unemployment is currently at a postwar record; 4 million are out of work.

Although joblessness is the most pressing domestic political issue here, the chancellor has another goal, too: the timely launch of the single European currency, the "euro." For this he needs to be sure that Germany's public finances are in order.

Germany, more than any other country of the European Union, wants a union that is more than just a free-trade zone but a genuinely integrated economic and political entity.

And Kohl wants this more than any other politician in Germany. He and his generation, particularly, want a Germany anchored in a strong Europe.

"Renationalization" of German interests is anathema to them: Avoiding this is their way of saying "never again" to the horrors of the two world wars.

The sturdiness of the deutsche mark is one of postwar Germany's proud national achievements, especially for those who remember the hyperinflation of the Weimar years between the wars. But Kohl is willing to surrender this coin for the euro.

And although currency policy is not generally a subject that makes hearts beat faster, Kohl has called the currency union "a matter of war and peace in the 21st century."

This is not to say that Germany would send gunboats across the English Channel if the British government chooses not to take part in the common currency - as it may. Rather, Kohl sees currency union as peacekeeping in the broadest sense, as an aspect of anchoring Germany within a larger Europe.

But the timely launch of the euro is not a sure thing, and Bonn has had some embarrassments on this in the last several months.

The EU's Maastricht Treaty sets forth "convergence criteria," standards that member countries must meet to take part in currency union. Budget deficits, for instance, are to be 3 percent or less of gross domestic product.

This has had EU governments scrambling to trim to fit. But at the end of last year, Germany, whose fiscal discipline is generally a matter of great national pride, had to acknowledge that an expected 2.9 percent deficit was actually 3.6 percent.

Many analysts see some wiggle room in the interpretation of the Maastricht criteria. But Bonn has so emphasized the importance of "strict interpretation" to convince the German public that the euro will be as sound as the mark that the chancellor's internal wiggle room is constrained.

And unless the chancellor can make progress with the budget, German leadership with the EU will be seriously undermined.

One down, one to go

The presentation of the program last week was only a first step. The unions have blasted the cuts, and the opposition Social Democrats have put forth their own program. Despite his willingness to set aside the "consensus" standard, Kohl still has to face the fact that Germany's decentralized economic system leaves important elements in the hands of the "social partners," labor and business, who are free to negotiate what they will.

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