German government vows to press on with pension reform

While the Social Democrats (SPD) reached a compromise Tuesday with their Greens coalition partners on the proposed pension reforms, the SPD still faces a major battle in winning over the unions and the Christian Democrat-led opposition to its reform package.

At a late night meeting on Monday that stretched into the early hours of Tuesday, the Social Democrats averted a major coalition crisis over the pension plan by hammering out a compromise with the Greens on disability pensions and the timetable for introducing the reforms.

However, the agreement left many pension disputes unresolved and could lead to further conflicts between the SPD and Greens. The compromise came hours ahead of the Cabinet's consideration of the changes Wednesday and their introduction into parliament Thursday.

"We will bring the legislation in with the support of the coalition partner," declared SPD parliamentary faction leader Peter Struck after a meeting of the Social Democrats approved the pension changes.

The party is expected to have overwhelming support for the measure within its own party as well - 250 of its 270 legislators are expected to support the changes.

But while the administration of Chancellor Gerhard Schroeder of the SPD hopes parliament will approve the pension changes by January, it has so far failed to reach agreement with the opposition on the plans.

Speaking after the SPD party meeting, Labour Minister Walter Riester said that support of the opposition "remained open", reaffirming the government's determination to forge ahead with the pension changes without the opposition.

Considering the political sensitivities of the government's proposed pension changes, Berlin hopes to win over the conservative opposition to the retirement plan, which is also aimed at addressing the burden that the "greying" of the German population is putting on the retirement programme.

But the Christian Democrats' social affairs expert, Horst Seehofer, warned on German television Tuesday that the pension reforms could become an election issue.

As part of the compromise, the government has agreed to delay from 2001 until 2002 the launch of new provisions aimed at encouraging the greater use of private pensions as a way of easing the burden on the state system.

In return for their concession on this issue, the Green have demanded that cuts in pension increases be moved up from 2003 to 2002. The SPD, however, has not definitively agreed to this tit-for- tat concession.

The Greens are primarily concerned that pension reform does not overburden Germany's younger generation, from which the party draws most of its support.

Also under the proposed changes, state pensions are to decrease from 70 per cent of average salaries to 64 per cent over the next 30 years with contributions falling from 20 per cent to 18 per cent. However, union are expected to demand pensions remain well above the 64-per-cent mark.

With the government under time pressure to enact the pension reforms and unions threatening industrial action over the changes, Riester said he is prepared to consider union concerns over industry pensions and the provision of supplementary pensions.

(la/dpa)