Government Retreats to Re-Think Germany's Future

The time has come for Germany's grand coalition to prove that it can really move the country forward. At the center of the Berlin cabinet's most urgent tasks this year are measures to revive the flagging domestic job market. Unemployment is still only slightly below the five million mark.

The difficult task ahead will be to boost consumer spending without losing sight of the larger aim: budget consolidation.

In their coalition treaty, the Christian Democratic/Christian Social Union bloc (CDU/CSU) and its Social Democratic (SPD) partner agreed on a special 25­­-billion-euro ($30.2 billion) investment program in 2006 to promote employment and growth through more funding for research, improved infrastructure, more support for families and favorable tax treatment for capital investment and home improvement.

At their two-day strategy meeting at Genshagen Castle near Berlin, cabinet ministers are hoping to send out a signal of harmony and resolve without sacrificing the profile of the mainstream parties they represent.

This in itself seems like squaring the circle. An added irritation is the fact that some major policy issues have been the subjects of heated debate even within both the SPD and the CDU/CSU.

SPD general secretary Hubertus Heil at the weekend suggested that 25 billion euros for fresh investment would be too little. But SPD Labor Minister and Vice Chancellor Franz Müntefering hastened to assure the media that the original agreement will remain intact.

"I take it that we'll stick to the 25 billion euros we agreed on in the coalition treaty," he said. "We simply have to bear in mind the interests of our finance minister who's out to consolidate the budget in the medium-term. The 25 million euros from the state will free more resources in private business. So, the impact of the investment program will be even bigger."

Disagreement over low-wage sector

Another controversial issue is how to improve conditions for employment in the low-wage sector. The Christian Democrats are in favor of granting state subsidies to top up wages and to motivate people to accept relatively low-paid jobs rather than staying at home and living on unemployment benefits.

CDU labor affairs spokesman Ronald Pofalla said he thinks that such a policy makes perfect sense.

"We believe that the wage subsidies will not turn out to be a major financial burden on state coffers," he said. "It'll be less money than we'd have to spend otherwise on unemployment benefits."

But Social Democratic ministers fear that these so-called combined wages could have unforeseeable financial consequences and could lead to a reduction of regular jobs.

A nuclear future?

Cabinet ministers will also be debating the government's future energy strategy. A heated dispute has broken out over whether Germany should really phase out nuclear energy completely as decided by the previous government under former Chancellor Gerhard Schröder.

The controversy broke out after the recent gas dispute between Russia and Ukraine fuelled fears about Germany's increased dependence on gas imports from Russia.

Conservative Economics Minister Michael Glos is among the staunchest supporters of rethinking Germany's nuclear energy policy. Some of his fellow conservatives now even in favor of building new nuclear power plants.

These are only some of the issues which are bound to cause some friction at the strategy meeting. But Glos is confident everything can be sorted out in a constructive manner without jeopardizing the governing coalition's clout.

"Marriages of convenience often last longer than those based on love," he said.