Schröder in a Corner

The European Commission unveiled plans to change the ways cars are sold and repaired across the EU on Tuesday.

Consumers are likely to benefit from the anticipated changes which will ease car maufacturers’ grips on the dealership network, and which aim to make both buying and servicing cars cheaper.

But the plans were condemned by German Chancellor Gerhard Schröder, who warned they could lead to job losses in the country’s car industry.

Schröder, who faces an election in September in which unemployment is a key issue, said Germany could not risk further trouble in the labour market as a result of the reforms. He said Berlin might resist some of the changes.

Taking the bull by the horns

Schröder’s tough stance on the EU’s car market shake-up follow a series of verbal attacks by the German chancellor after the European Union disclosed plans to issue a German budget warning.

Fighting to avert the proposed warning on Germany’s rising budget deficit, Schröder has opted to take the European bull by the horns by saying Germany would possibly fight the Commissions recent competition policy.

Schröder, who is under acute criticism for not keeping his promise to reduce German unemployment, is seeking to avoid further embarassment from an EU warning and to take on the role as protector of jobs.

Schröder has even gone as far as to suggest the European Commission had reasons other than economic ones for recommending ministers to warn German ist deficit is too close to the EU treaty limit of 3 per cent gross domestic project.

The early warning is the first stage in a long procedure that could finally lead to Germany paying a huge fine.

German oppositions and leading European social democrats have accused Schröder of harming the Commission’s independance by trying to block a rebuke.

"The Commission has behaved correctly," Enrique Baron, chairman of the Socialists and Social Democrats in the European Parliament said. But he also added that Germany had insisted on the tough rules in the first place.

Hans-Gert Pöttering, president of the European People’s Party, said the assertion that the Commission was interfering with this year’s German election was absurd, since most commissioners were social democrats.

Elections make Schröder feisty

But the coming elections appear to be playing a large role in Schröders current tough stance on the EU.

The chancellor who made bold proposals for strengthing EU bodies last year, is keen to show himself as the driving force behind European integration. On Monday, after talks with French President Jacques Chirac, he said both countries would work hard together on reforming EU institutions.

Yet another blunder

Schröder knows that he can ill afford the humiliation of an EU warning on Germany’s economic downturn.

His criticism of the EU’s proposals to change the selling and servicing of cars in Europe has only added to the impression of government disarray as German unemployment hurdles the 4 million mark and various cabinet ministers are under fire after a series of cabinet blunders.

According to Richard Hilmer, director of the Infratest polling institute, a formal EU warning would hurt Schröder by undermining his centre-left government’s hard-won reputation for fiscal probity.

Schröder is already lagging in the latest opinion polls.

The union is now scoring 41 per cent in the latest ratings, five points ahead of Schröder’s Social Democrats.

However, according to political scientist Richard Woyke, the EU warning may contribute to a dismantling of German Finance Minister Eichel, but will not determine the outcome of the election.

"The economy will determine the election", he told Reuters.

However, the federal audit office issued a report on Monday which stated that 70 percent of job placements reported in five local employment offices had been "wrongly entered". This could mean that Germany’s unemployment figures are higher than originally reported.