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Last Updated:  Thursday, 13 March, 2003, 11:35 GMT
Schroeder's defining moment
By Ray Furlong
BBC, Germany

German Chancellor Gerhard Schroeder
Schroeder's speech could mark a turning point
The German Chancellor will lay down his reforms to rescue the economy in a keenly anticipated speech on Friday.

The poster on the wall at a Berlin job centre offers "Job opportunities in Ireland".

There are certainly fewer and fewer here in Germany.

The latest figures put the total of unemployed at 4.7 million people - and on Friday Chancellor Gerhard Schroeder will reveal how he intends to reduce it, in a tensely awaited Bundestag speech.

Seldom has a political address generated so much speculation here.

The media have followed Mr Schroeder's every meeting to scrutinise who he's consulting with.

They've even reported on his chief speechwriter, who has apparently been chain-smoking his way through long nights over the draft - despite a bought of flu.

A panacea?

Mr Schroeder is expected to put an end to months of uncertainty over how he'll deal with an array of problems that have caused support in his government to collapse.

"We are the most important market for our European neighbours," says Martin Wansleber, chief executive of the German Chamber of Commerce.

We hope that Gerhard Schroeder will have the courage to outline a national master-plan
Martin Wansleber
German Chamber of Commerce
"It's therefore very important that the economic situation here is strengthened."

Key issues include reform of the labour market, making it easier to hire and fire people, or changes in the health system - plagued by rising costs and falling standards.

"We hope that Gerhard Schroeder will have the courage to outline a national master-plan," says Mr Wansleber.

"We are confident that he knows what needs to be done - we are less confident his party does."

Collapse of popularity

Mr Schroeder must also address burgeoning public debt: his country has suffered the humiliation of exceeding the limits of the Euro Stability Pact.

The political fall-out has been huge. Never before in post-war Germany has backing for a government fallen so quickly after it won re-election.

Greenpeace activists install a anti-war banner at the Brandenburg gate in Berlin
Schroeder has diverted attention with his anti-war stance
In recent weeks the Chancellor has managed to divert attention to the international arena, rallying Germans behind him with his opposition to military action against Iraq.

But it failed to avert crushing defeat in two state elections in February, and the underlying economic problems won't go away without brave reforms.

Last week round-table talks between government, the unions and employers collapsed without agreement.

Now Mr Schroeder must finally make a decision.

"His former method of policy-making, to bring all the interest groups together and to find a consensus between everyone is no longer possible," says Hermann Scheer, an MP from Mr Schroeder's Social Democratic Party.

'Howling and gnashing'

Not everyone in the party agrees. Already, dissenting voices have warned against dismantling Germany's generous welfare state.

Depending on who you believe, Mr Schroeder will propose either modest curtailments of state benefits and protection from dismissal - or something more radical.

German Chancellor Gerhard Schroeder looks at his watch
It's time for reform in Germany
He has said his speech will cause "howling and gnashing of teeth" among the unions, also critical of the many reform blueprints that have appeared recently.

But Germans retain a strong emotional attachment for their "social market" model.

"It's very deep-rooted in the German conscience, because the social market economy was the model which most people think was responsible for the economic miracle of the 1950s, 60s and early 70s," says Dr Elmar Altvater from Berlin's Free University.

"There is some nostalgia about the social market today, but we need something which is comparable to that - which meets the challenges of the new globalised world but isn't a pure market."

If that sounds like another "third way" - well, that's just what Gerhard Schroeder started with when first elected back in 1998.

Called the "New Middle", it's been quietly forgotten.

He must now come up with something else.

The BBC's Tristana Moore
"Schroeder's own job could be on the line"

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11 Mar 03 |  Business
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06 Mar 03 |  Business
German economy at a standstill
26 Feb 03 |  Business
Country profile: Germany
07 Mar 03 |  Country profiles

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