Chancellor Gerhard Schroeder won a critical victory Friday when Germany's Lower House of Parliament passed a package of social and labor market reforms. The bills are designed to reinvigorate the German economy, the once mighty engine of Europe that now appears infected with "the Japanese disease."
Last week's vote is only the first step, however. Germany's Upper House, controlled by the opposition, must also pass the bills, and then the country's powerful labor unions must accept the reforms. In truth, they have no choice: Structural reform is essential to Germany's future. But German voters and politicians could continue to avoid hard choices and foist the difficult decisions onto future generations -- as they have in the past and as many other voters are doing elsewhere in the world.
Germany's economy is in sad shape. Growth registered an anemic 0.2 percent in 2002, and the government has reduced its forecast for 2003 from 0.75 percent to 0, and for 2004 from 2 percent to 1.5 percent. With gross domestic product shrinking since the fourth quarter of 2002, Germany has had two recessions in the last 18 months. Some 4.2 million people, about 10 percent of the working population, are unemployed. The government's accounts are just as grim. Finance Minister Hans Eichel revealed a 41.89 billion euros ($48.7 billion) budget deficit, more than twice that originally projected, the largest in postwar German history, and 0.8 percentage point over the limit set by the euro stability pact. Many economists project the deficit will exceed 4 percent this year.