November 12, 2005

German parties vow to work together

By Noah Barkin

BERLIN (Reuters) - German parties said on Saturday their
new coalition deal was no "love affair" and admitted
differences on key issues remained, but vowed to work together
to tackle the country's economic woes.

A day after sealing an agreement which took four weeks of
talks to conclude, the partners were frank about the challenge
they faced in steering Germany's first "grand coalition" of
conservatives and Social Democrats (SPD) since the 1960s.

But in a 90-minute news conference, the leaders of both
camps expressed a desire to move beyond their differences and
forge a united government capable of returning Germany to the
ranks of Europe's economic elite.

"Germany is on the decline in Europe and globally. Our goal
is to stop that trend and reverse it," said Christian Democrat
(CDU) leader Angela Merkel, 51, expected to be elected
Germany's first woman chancellor when parliament meets on
November 22.

"The goal is to bring Germany back into the top three of
the European Union within 10 years," she added.

Following the deal on Friday, Merkel takes the reins of a
potentially unwieldy bipartisan government that includes her
Christian Democrats (CDU), their Bavarian sister party the
Christian Social Union (CSU) and the SPD of outgoing Chancellor
Gerhard Schroeder.

They have made the fight against unemployment, which rose
to post-war highs under Schroeder, the centerpiece of their

Reducing joblessness will only be possible if they can get
the broader German economy working again. Once the economic
motor of Europe, Germany now has one of the weakest growth
rates in the 25-nation EU.


The challenge is formidable for parties that were forced
into coalition talks after a surprisingly tight September 18
election left them with no other viable alternatives for
forming a stable government.

"What we are undertaking here is no love affair, that is
very clear," said Matthias Platzeck, the premier of Brandenburg
who is expected to be elected chairman of the SPD next week.

"This is a thoroughly unemotional marriage of convenience."

At the heart of their deal is an agreement to bring
Germany's budget deficit back within European Union borrowing
limits by 2007 -- a colossal challenge requiring upwards of 35
billion euros in savings or extra revenues.

Much of that sum will come from higher taxes. The parties
have agreed to raise value added tax by 3 percentage points in
2007 -- a move some economists fear could hit already weak
German consumption and prevent them from achieving their goal
to slash unemployment, currently at 11.6 percent.

The parties failed to reach a consensus on several key
issues, notably in nuclear energy and healthcare. They are
expected to revisit some of the contentious themes at a later

"We still have a lot of important issues to discuss," said
outgoing SPD chairman Franz Muentefering, who is slated to
become vice-chancellor and labor minister under Merkel. "In
healthcare there is no middle ground between our positions."