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Germany aims to aid economy

©Associated Press
March 15, 2003

BERLIN -- Chancellor Gerhard Schroeder urged limited reform of Germany's faltering economy Friday, saying rigid rules on hiring and firing should be eased and jobless benefits trimmed.

But the German leader, whose standing at home has slumped despite his popular antiwar stand on Iraq, stopped short of pushing bold free-market changes that would anger his powerful union supporters.

"Our country did not grow strong through the law of the jungle, through 'hire and fire,' " Schroeder declared in a much awaited, nationally televised address.

Still, Germany's increasingly costly social welfare state, rooted in the 19th century and expanded by governments of the right and left alike after World War II, has hit Schroeder with a vengeance since he won re-election in September.

Many economists and business leaders have long argued that Germany must cut the burden on business imposed by social programs and worker protection if it wants to spur growth, lagging around zero into a third straight year.

Since squeaking by on a campaign platform of opposing war in Iraq, Schroeder has seen his fortunes fall with rising unemployment, a growing budget deficit and popular disgust at proposals for higher taxes. Some believed desperation would push Schroeder to propose more drastic reforms.

Opposition politicians, who occasionally heckled Schroeder during his 80-minute speech, said he fell far short.

"After 4 1/2 years of your government, the economy and the labor market are in steep decline," shouted Edmund Stoiber, Schroeder's defeated conservative challenger last year. "This is no way to lead our country out of the crisis."

The proposals met cautious approval from business groups. Labor unions also did not reject them outright, suggesting Schroeder may have a chance to seize the political initiative.

Schroeder proposed loosening the law on firing to permit businesses with five workers or fewer to hire new staff on a temporary or part-time basis without incurring the law's stiff protections.

He also announced plans to limit jobless benefits to 12 months for people under 55, down from 32 months, to encourage people to get jobs, adding that unemployed who refuse low-paying jobs should face sanctions.

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