Schroeder vows to press ahead with controversial economic reform

GERMAN Chancellor Gerhard Schroeder, humiliated by the third state election rout for his Social Democrats this year, vowed yesterday to press on with painful economic reforms to pull Germany out of recession.

Sunday’s defeat in the conservative stronghold of Bavaria, the worst SPD result there since World War II, showed voters are seething at his failure to tackle high unemployment and are sceptical about the biggest welfare state overhaul in decades.

But the end of campaigning in Germany’s second most populous state has opened a half-year window to get reforms through parliament before the parties get distracted by new elections.

The conservatives can block most of the measures through their control of the upper house of parliament, the Bundesrat.

Schroeder, preoccupied with world diplomacy, had written off the Bavarian election and made few campaign appearances there.

“Elections don’t matter to Schroeder at the moment. He’s got to focus on getting the reforms implemented by the end of next year,” said Bernhard Wessels, political scientist at Berlin’s Free University. “He’s got to start showing results.”

That is Schroeder’s only hope of winning the 2006 general election. He announced this month he planned to stand again.

Talks in Berlin between the centre-left government and conservatives were at a standstill in the run-up to the election as the conservatives avoided supporting unpopular cuts. They plan to present their own proposals next month.

Schroeder’s drive to cut back jobless benefit, crack down on welfare recipients and slash costs in the health and pension systems mirrors efforts by other European nations struggling to adapt to weak economic growth and ageing populations.

But it has divided his party, which has lost over 30,000 of its more than 650,000 members this year amid anger that the SPD is betraying its social principles. The SPD’s defeat in Bavaria sparked renewed calls from SPD leftwingers for Schroeder to rethink the reforms.