2003-10-18 -- German Parliament Votes to Cut Welfare Benefits and Taxes

Good, affordable health care for all is a goal that must be fought for
not only in the US, but also in countries that where people are
struggling to maintain it.

Germany's parliament has approved a package of measures, already
agreed by the cabinet, aimed at the amalgamation of unemployment and
social welfare payments - measures that would lead to a severe
reduction in the living standards of the poorest members of society.
The aim of the reform is to force long-term unemployed and the needy
to accept any form of cheap labor. The tying of state support to forms
of cheap labor had a precedent in Germany with the forced labor
introduced in Germany during the period of the Weimar Republic. Major
cuts are also planned for health coverage. The massive cuts in welfare
include shortening the period of payments for the unemployed and the
consolidation of different forms of payments, drastic cuts to health
insurance and the transfer of costs onto the shoulders of employees,
together with the plan for fees for visits to the doctor and the
so-called "personal contribution" for insurance payments.

On May 17th, 10,000 trade unionists and unemployed council members
demonstrated in Berlin against restructuring the welfare state. "We
are being sold outright destruction of the welfare state under the
guise of reforms, "a speaker stated.  Huge strikes have occurred in
Germany, France, and Italy against welfare reform, wage freezes, and
increases in the workday.



New York Times, October 18, 2003

German Parliament Votes to Cut Welfare Benefits and Taxes

By RICHARD BERNSTEIN

BERLIN, Oct. 17 - The lower house of the German Parliament on Friday
passed a major part of the economic reform package that Chancellor
Gerhard Schröder has said is essential to reducing unemployment and
prodding this country out of its prolonged economic stagnation.

The reforms would reduce welfare benefits and increase pressure on the
long-term unemployed to accept job offers. The package also moved up
by one year, to Jan. 1, an $18 billion tax cut aimed at stimulating
growth.

The legislation, which still faces a tough battle in the upper house
before it becomes law, is seen by some as an essential part of a drive
to alter radically the nature of the German economy. It would strip
away some cherished aspects of the generous social welfare system,
give employers greater flexibility to hire and fire workers, cut taxes
and, more generally, restore Germany's status as Europe's most
important economic engine.

The government recently announced that, this year, the growth rate
would be just about one-quarter of 1 percent, as unemployment remained
at about 10 percent.

Mr. Schröder has threatened to resign if his program, known as Agenda
2010, is not adopted by the end of this year. But he has been forced
to water down some changes to get the support of leftist legislators
from within his own ranks.

"It's important but only in the sense that a negative vote would have
meant the end of the governing coalition," Uwe Andersen, a professor
of political science at Bochum University, said of Friday's vote. "I
think we are in a position where really revolutionary changes in the
German system are necessary, and I'm not convinced that the big
parties are ready to go that way, especially the government parties."

Mr. Schröder's overall reform effort received another lift on Friday
when the upper house of Parliament approved modifications in the
health care system that would remove some benefits while adding a
co-payment for regular doctor's visits.

Leftist legislators, supported by powerful labor unions, have argued
that Agenda 2010 requires too much sacrifice from workers and not
enough from employers.

For example, labor unions have worried that forcing unemployed people
to choose between taking low-wage jobs and losing benefits altogether
will force overall wages down.

To meet that concern, Mr. Schröder agreed that those pressed into
low-paying jobs were to be paid what is called the customary wage for
their locality. Critics complain that this concession will prevent the
general lowering of labor costs needed to make Germany more
competitive.

"We're looking at small, necessary steps for the reform of this
country," said Irwin L. Collier, a professor of economics at the Free
University of Berlin. "But they are very small and modest steps, and
each one comes only after a lot of ideological street fighting."

= = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = =

October 17, 2003
Germany Approves Tax Relief for Insurers
By THE ASSOCIATED PRESS

Filed at 10:57 a.m. ET

BERLIN (AP) -- A plan to offer tax relief to Germany's insurance
industry by making their stock losses tax-deductible was approved
Friday by the lower house of parliament.

Germany's insurers have been suffering amid falling financial markets.
The government says the measures in the bill approved Friday will help
prevent insurers from getting into financial trouble and lead to more
stable tax revenues.

Under the plans, life and health insurers will be able to offset the
value of equity write-offs against their tax bill for operating
earnings. The change is expected to save insurers millions of dollars
and ease future liabilities should stock markets fall.

Under existing tax rules, insurers can't offset the value of stock
write-offs against their tax bills.

The bill still requires approval from the upper house of parliament.
That chamber is controlled by the conservative opposition, which voted
against the plan Friday.

If given final approval, the tax changes would take effect in 2004,
but insurers will have the option of applying them retroactively for
2003.



 = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = =


More information on the German welfare restructuring plan:
http://www.dw-world.de/english/0,3367,1432_A_988374_1_A,00.html



Agenda 2010

The German government's plan to boost the ailing economy focuses on
reductions in health care benefits, restructuring labor regulations,
tax cuts and an overhaul of the pension system.   Here's an Agenda
2010 overview as portrayed by its supporters.

Health care reform

On Sept.   26, Germany's parliament, the Bundestag, passed a law that
would reduce monthly premium payments for the national healthcare
system from 14.  3 percent of an employee's income to 13.6 percent
next year and 12.15 percent by 2006.   As health insurance payments
are split by employers and employees, the reduced premium is aimed at
lowering Germany's staggering non-wage labor costs.   To finance the
cuts, the public health fund will no longer finance dentures or
replacement teeth and will require a patient co-pay for doctor visits
and prescriptions.   The reforms are expected to save insurance
companies up to ?20 billion.

Social Insurance Reforms

Earlier this year, the government commissioned a panel  led by Bert
Rürup to issue an advisory plan for saving a  social system threatened
with collapse by a fast-graying  German population. The key provision
of the Rürup  Commission plan, released in August, is to increase the
age of pension eligibility from the current 65 to 67. It  would also
reduce pension levels from 48 percent to  40.1 percent of a recipient'
s former income. Workers  would not be eligible for early retirement
before the age  of 64, and the annual cost-of-living increase would be
reduced by 0.5. percent. The government is considering  the
commission's work as it drafts its own bill for  reforming the pension
system. The first reading is  expected in November or December.

Meanwhile, a commission appointed by the conservative  opposition
Christian Democrats and led by former  German President Roman Herzog
has also called for the  retirement age to be increased to 67, a
proposal that has  split the Christian Democratic Union internally and
led to  a rift with its Bavarian sister party, the Christian Social
Union. The Herzog Commission has also called for a flat  monthly
health insurance premium of ?264 for all  Germans, a move it says
would save the public health  fund ?27 billion.

Tax cut

The third phase of a previously approved German tax  reform would be
bumped up to 2004 from its originally  planned implementation in 2005.
The reform will change  the country's progressive tax rate from 19.9
percent to  15 percent at the lowest level and from 48.5 percent to
42 percent at the highest level. The cut is expected to  save
taxpayers a total of ?21.8 billion. Chancellor  Gerhard Schröder is
hoping the cut will spur consumer  spending and provide a needed boost
to the country's  ailing retail sector. The government plans to
finance the  tax cut by slashing federal subsidies and privatizing
government-held properties.