Bloomberg News

Merkel Cites East German Lessons for EU’s Problem States

February 19, 2013

German Chancellor Angela Merkel

German Chancellor Angela Merkel has been at the forefront of pressing euro states hurt by the debt crisis to overhaul their labor markets and carry out other reforms to better compete in a globalized world. Photographer: Jason Alden/Bloomberg

Chancellor Angela Merkel said that European countries burdened by the fallout of the euro-area debt crisis can learn from East Germany’s experiences of economic overhaul after the fall of the Berlin Wall.

Merkel, Germany’s first chancellor from the former ccommunist east, said in a speech to regional professionals and trade-chambers representatives yesterday that her East German background had taught her there is no way around enacting reforms to become more competitive.

“When we became part of the Federal Republic of Germany we had to carry out massive reforms to restructure our economy, also with great upheaval,” Merkel said in the western city of Mainz. “But this was necessary to create a solid basis of small and medium-sized companies in the new states.” While the eastern German regions have since been eligible for special European Union funds and subsidies, “at the end of a structural reform there must be a competitive company,” she said.

Merkel, as the leader of Europe’s biggest economy, has been at the forefront of pressing euro states hurt by the debt crisis to overhaul their labor markets and carry out other reforms to better compete in a globalized world. She plans to jointly present steps aimed at raising competitiveness with French President Francois Hollande at an EU summit in June.

Agenda 2010

In addition to her experiences in East Germany, Merkel cited a set of German reforms collectively known as Agenda 2010 that were pushed through by her Social Democratic Party predecessor, Chancellor Gerhard Schroeder, as an example to Europe of the need to raise competitiveness.

The Agenda 2010 package of labor reforms and welfare cuts prompted street protests in Germany in 2004 against Schroeder’s SPD-led coalition with the Greens. Merkel defeated Schroeder to become chancellor the following year after unemployment reached a post-World War II high of 12.1 percent. The Paris-based Organization for Economic Cooperation and Development is among the bodies that credit Schroeder’s measures for helping to bring down the German jobless rate to 6.8 percent in December 2011, the lowest since reunification of East and West Germany in 1990.

Agenda 2010 “has brought us to the situation we are in today, it didn’t fall out of the sky,” said Merkel, who will seek a third term in federal elections on Sept. 22. “At the beginning of the 21st century, Germany was the sick man of Europe and that we are where we are today also has to do with reforms we carried out in the past. That’s why we can say in Europe that change can lead to good.”

Latest Poll

Support for Merkel’s CDU/CSU bloc rose 1 percentage point to 40 percent in a weekly Insa poll for today’s Bild newspaper. Her Free Democratic Party partner also gained a point to 5 percent, giving the coalition a combined 45 percent. The main opposition Social Democrats held at 29 percent, while their traditional Green Party allies were also unchanged at 15 percent, yielding a total of 44 percent. The opposition Left Party held at 6 percent.

So long as the Left gets into parliament, neither Merkel’s current coalition nor the SPD-Greens have their own majority, Bild cited INSA chief Hermann Binkert as saying. Insa polled 2,023 voters on Feb. 15-18. The margin of error was plus or minus 2 percentage points.

To contact the reporter on this story: Joseph de Weck in Berlin at jdeweck@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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