EU Countries Wary of 'Sick Man of Europe'

It's been called 'The Sick Man of Europe' by the British and 'near stagnation' by the Italians. Germany's standing in Europe is coming increasingly under fire from EU quarters as the country's Red-Green coalition fights recession with tactics popular with socialist administration's of the past.

Dire warnings that Germany must brace itself for major reforms came on Tuesday in Chancellor Gerhard Schröder's presented his policy plans for the first time since his re-election a month ago. Schröder told his country that taxes must rise (to meet the requirements of nearly defunct eurozone deficit rules), the welfare state cut back and the labour market liberalised. It was a speech that the rest of Europe had anticipated but one that very few enthusiastically welcomed.

In Britain, the initial wave of congratulation after Schroeder's slim election victory has subsided, replaced by concerns over the repercussions Germany's economic plight may have on the European Union. The tax proposals at home and the destabilising effect of Germany's contribution to the woes of the EU's Stability and Growth Pact are apparently worrying the British government.

British fear 'Second Japan' recession in Germany

According to the German daily 'Frankfurter Allgemeine Zeitung', voices in British poltics fear that Germany could burden the whole of the EU with its problems. The consensus is that the coalition's policies may not be enough to haul Germany out of its slump and avoid the "Second Japan" scenario where its economy wallows in a decade of recession.

Japan, once an economic powerhouse like Germany, saw a steady downward trend turn into a disasterous financial slump.

Prime Minister Tony Blair's modernising approach seems to be cast adrift from his German counterparts take on social democracy. The British newspaper 'The Guardian' called the vision of Schroeder's coalition pact a "solid Old Labour programme", hinting at similarities to the approach of Blair's underachieving socialist forefathers.

Even in Germany, the pact was described as "a poisonous cocktail of business-, consumer-, and market-hostile measures," by senior Frankfurt economists, according to newspaper.

In Spain, where the Conservative government has stimulated impressive economic growth and delivered on budget, Prime Minister Jose Maria Aznar issued a cloaked reminder to Germany regarding its responsibilities to Europe.

Spain calls for 'responsible parties' to take action

Aznar, a staunch supporter of the Stability and Growth Pact told the Frankfurter Allgemeine Zeitung: "In the light of the present insecure state of the international economy, political parties currently responsible for this must create confidence and not add further to the uncertainties".

The media in Spain has also taken up the gauntlet. In the left leaning liberal newspaper 'El Pais', an editorial said that there was "limited understanding" in Spain for Germany's position regarding the problems it is having adhering to the EU Stability and Growth Pact.

Confidence in German government low in Italy

In Italy, the concerns over the state of the Germany economy are also clear to see. The Italian business publication 'Il Sole 24 Ore' recently led with a headline that read "Germany Near to Stagnation". It was accompanied by the declaration that "The programme of the Government does not convince".

The loss in confidence in Italy also surrounds the difficulties that Germany is having with the Stability Pact. Once itself the ailing financial power of the EU, the Italians now echo other opinions that this mantle has now been passed to the Germans.

But is it possible that the new coalition pact may actually revive the German economy as Schroeder and his ministers believe? According to Hans-Werner Sinn, president of the Institute for Economic Research, the new government may do even more damage.

Recovery nowhere in sight, say experts

"Germany has been on the wrong track for 30 years," said Sinn in an interview with 'The Guardian'. "The Government's share in GDP has risen from 39 per cent to 48 per cent. Unemployment has increased from 150,000 to about four million. These factors are connected, and a reversal of trends is not in sight for either. The most recent proposals of the federal government will take the country even further down the wrong track."

The rest of Europe remains hopeful that Sinn and his researchers will be proved wrong.