July 5, 2005

Germany’s Schroeder throws down gauntlet to Merkel

By Noah Barkin

BERLIN (Reuters) - German Chancellor Gerhard Schroeder madea pitch for the political center ground on Tuesday beforelikely defeat in an election pitting him against theconservative right and leftist defectors from his own party.

Schroeder painted his Social Democrats (SPD) as a safehaven between two extremes as he presented the party'smanifesto before an early September poll which could still beblocked by President Horst Koehler or Germany's top court.

Schroeder told reporters in Berlin he looked forward tospelling out policy differences with his conservative rivals ina television showdown with their leader, Angela Merkel.

"We have a program that speaks to the middle of our societybecause it strikes a prudent balance between economicefficiency and social sensitivity," said Schroeder, accusingMerkel's conservatives of wanting to strike the socialdimension from Germany's market economy.

"I stand at the ready, no doubt about it," he continued,when asked about the prospects of a television debate withMerkel. "I look forward to a debate that makes clear what theissues are and who stands for what."

There is not a long tradition of televised debates betweencandidates in Germany but Schroeder faced his 2002 opponentEdmund Stoiber twice in the last campaign.

Schroeder faces an uphill battle to win a third term.According to the latest polls, his Social Democrats stand 18points behind Merkel's Christian Democrats (CDU), who are dueto present their own election platform on Monday.

The SPD manifesto has been described as having somethingfor everyone in the party, which is split between centrists whowant Schroeder to press on with his unpopular economic reformsand traditional leftists who would prefer to see them watereddown.

In a nod to the leftists, it promises a 3 percentage pointtax rise on Germans with annual incomes of over 250,000 euros,a softening of unemployment benefit cuts for older jobless, andan extension of the minimum wage across all sectors of theeconomy.

For centrists, there is a cut in the base corporate taxrate to 19 percent from 25 percent.


Merkel, whose party has steered clear of committing itselfto any specific programs before its platform is finalized, madea brief statement in response to the SPD program in which sheattacked her opponents for lacking courage.

Senior figures within the CDU have backed an increase inthe value-added tax to 18 percent from 16 percent to raise cashto reduce non-wage labor costs. They are also consideringraising the retirement age to 67 from 65.

The problem for Schroeder is that he faces a two-frontbattle. Not only will he be fighting the CDU for votes, but anew leftist alliance of former communists and disaffectedmembers of his own party threatens him from the left.

The alliance, which has yet to agree a name, is led bypopulist former SPD chief Oskar Lafontaine and Gregor Gysi, acharismatic leader of the PDS, the successor party to EastGermany's communists.

They have surged to 11 percent in recent polls, more thandouble the tally they would need to enter the Bundestag,Germany's lower house of parliament, and enough to make them aserious threat to Schroeder.

Asked on Tuesday whether he would rule out a "grandcoalition" with the CDU, Schroeder dodged the question andinstead lit into the party of his former ally Lafontaine.

"I will never do anything with this strange grouping on theleft, even if they make it into the Bundestag," Schroeder said."You can consider that definitive."

Schroeder's plans for a poll could still be blocked by theconstitution, which set up obstacles for any dissolution ofparliament because of the chaos of the pre-war Weimar Republicthat led to the rise of Hitler.