Economy main issue in Election Run-up

With elections in September, pressure on Chancellor Gerhard Schröder to tackle unemployment is high.

Last week, after much debate, the German government decided on a nationwide scheme to combat unemployment in which people who take on low-paid jobs get a top-up from the state.

Bavarian Prime Minister Edmund Stoiber launched his campaign for the chancellorship on Saturday with a promise to overturn key parts of current economic policy. Speaking after his nomination, Mr Stoiber accused Chancellor Gerhard Schröder of failing to keep his election promises to cut unemployment.

"Look in the papers. More bad news. Within the euro zone, the German economy is stuck in a siding. That is the core issue in this election campaign," Stoiber told reporters at a Christian Democrat meeting in the eastern city of Magdeburg.

Unemployment is predicted to hurdle the four-million mark again this winter.

The nationwide scheme proposed by Chancellor Schröder and his Finance Minister Hans Eichel, is expected to create some 100, 000 jobs.

However, critics say topping-up low-paid jobs will not solve the problem with Germany's labour market, which derive from the country's employment laws and high labour costs.

At current, many of the unemployed are better off on state benefits than in badly paid jobs. The subsidies planned by the government are supposed to remove this disincentive.

The Trade Unions, however, disagree with Schröder's plans. They say 500, 000 new jobs could be created if less people worked overtime. And they fear employers could cut jobs if they introduced the new scheme.

But other business groups say cutting overtime would be a danger to Germany's competitiveness.

The dissent on finding ways to stop unemployment in Germany from hurdling the 4 million level is making a mark on the current election campaign.

"We will hold Schröder to the promises of the 1998 election. What happened to improving economic performance? What happened to real tax relief? What about encouraging young people to start up businesses?" conservative candidate for chancellorship Edmund Stoiber said on Saturday.

Stoiber called for more measures to boost the poorer, eastern states, where unemployment at around 18 per cent is twice as much as that in the richer west. Rich in swing voters, the region has been a key election battleground since reunification in 1990.

With the elections in 9 months time, Schröder has been forced to push forward with labour market reform. But he can ill-afford quarrels with major players essential to seeing through with such reforms, such as the Trade Unions.

Bavaria booms

The Bavarian prime minister’s track record as premier of a state with a booming economy comes as criticism grows of Schröder's failure to stop Germany sliding into recession.

A year ago, Schröder's Social Democrats were soaring in the polls, but as the global economy has cooled, and unemployment in Germany is surging, the conservatives have caught up with the Social Democrats, the latest surveys show.

According to the latest poll, published by the Tagesspiegel newspaper on Friday, Schröder would win 58% of the vote if the position were directly elected, against 39% for Stoiber, and 32% for Merkel.

Economy main issue

Economic change is expected to outweigh personal charisma in determining who will win Germany's 2002 elections, newspapers declared on Saturday after Stoiber’s announcement to face Chancellor Gerhard Schröder in the coming elections.

Noting that some analysts have predicted Stoiber would find it hard to win centrist voters, even the left-wing Die Tageszeitung said what really mattered was economic competence. "We'll have to wait and see whether his conservative image really hurts him in the end. It seems that economic policy issues will decide the election," it wrote.