CDU Rejects Schröder's Offer of Reform Summit

The on-going struggle for Chancellor Gerhard Schröder’s Social Democrats (SPD) to bring Germany’s political powers together for an agreement on the tax reform plans hit another snag on Wednesday when the Christian Democratic Union (CDU) rejected the idea of special meetings to discuss the process.

Angela Merkel, the chairwoman of the CDU, Germany's main opposition party, told reporters after a meeting with the party’s state premiers that a decision had been made to reject Schröder’s invitation to discuss economic policy and find a common means of bringing the "Agenda 2010" reform plans to fruition.

Referring to the SPD-planned summit between the chancellor and the heads of Germany's 16 states, Merkel said, "We don't need special meetings," adding that Germany's economic problems must be solved quickly by the competent bodies, the Bundestag -- the lower house of parliament, and the Bundesrat -- the CDU-controlled upper chamber, and their mediation committee.

Hopes for compromise meeting dashed

The chancellor had hoped that he and Merkel could hold talks and find compromises before the draft legislation on the reforms enters parliament this autumn. The two parties had demonstrated their willingness to work together back in July when they agreed to a cross-party deal on health reforms.

But Merkel used the opportunity to reaffirm the CDU's rejection of the chancellor’s plan to force the self-employed to pay local business taxes and to combine social welfare and unemployment aid for the long-term jobless, according to a report by German press agency DPA. The opposition has made it clear that they aim to push for big changes to Schröder's "Agenda 2010" reform package and this latest rejection may force the chancellor to water down his reform plans which are aimed at spurring economic growth and encouraging hiring practices.

A rock and a hard place

The rejection is seen as a brave move by Merkel who faces opposition from within her own party and finds herself between a rock and a hard place on the subject of "Agenda 2010" -- help Schröder reform Germany and watch him get the credit, or block everything and take the blame.

Schröder himself, of course, continues to feel the pressure as he attempts to force through the measures that he believes will boost Europe's largest economy after sinking into recession in the first half of this year. The CDU’s rejection leaves the chancellor looking for alternatives while political analysts are already predicting a number of scenarios on how the reform package could get approved:

-- State leaders from both the CDU and the SPD may club together to ensure they get more federal cash out of the changes before agreeing to them,
-- CDU-led states in the Bundesrat may reject the laws and enforce compromises in a mediation committee between the Bundesrat and the Bundestag,
-- Schröder may outmaneuver the CDU by persuading individual states to back his reforms with the offer of financial concessions, a tactic that paid off in 2000 when he secured the Bundesrat's approval for tax cuts.

Chancellor remains convinced

Schröder told German N-24 television recently that he was sure he would get the reforms through parliament. "I am convinced that if the conservatives say 'no,' just stonewall, it will rebound on them because people understand that we need this reform process now," he said.