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"Germany gets going - greater dynamism for growth and employment"
Policy Statement by Federal Chancellor Gerhard Schröder in the German
Bundestag
Berlin
July 3, 2003
(Translation of advance text. Check against delivery)
Mr. President,
Ladies and gentlemen,
Europe's eyes are now on Germany.
Our economy, which generates some 30% of Europe's entire value added, bears a
special responsibility. We are living up to this responsibility, for without
a strong Germany there cannot be a strong Europe.
But, I would like to add, without the European single market and without European
integration, Germany would be unable to withstand the forces of global competition.
This is true in both economic and political terms. The same can, by the way,
be said of our participatory society and our social market economy.
For these reasons we will shoulder our responsibility for Germany and for Europe,
in the full awareness that it is in the interest of us all - for the one cannot
succeed without the other.
Against this background, we are coordinating our structural and cyclical measures
with one another and are assuming responsibility for stability and growth.
Therefore, with a determination unparalleled in Germany, we have taken decisions
that will result in increased dynamism, increased growth and increased employment.
We are thus in a position to dramatically reduce the tax burden on our citizens,
as well as that on small and medium-sized enterprises, from the beginning of
next year.
As of 1 January 2004, people in Germany will pay an average of 10% less tax.
We are lowering the entry tax rate to 15%. If I may remind you, five years ago
it was still 26%.
Ten % less tax - that means people will have ten % more to live the lives they
choose.
For that is precisely what we mean when we talk of "consumption" and "domestic
demand" -
that people can spend more of what they earn on the quality of their own lives
and on their children.
Ladies and gentlemen,
On 14 March I presented Agenda 2010, our program for structural renewal and the
modernization of our welfare state, to the German Bundestag.
It is the foundation on which our policy for growth and employment is built.
With it we are, on the one hand, attacking the long-neglected structural causes
of our weak growth, and on the other hand we are redesigning our welfare state
and social security systems to provide ourselves and generations to come with
a decent future.
The structural reforms in the Agenda will allow us to save 45 billion euro in
the federal budget in the period to 2010.
But they were designed neither primarily nor exclusively with a view to cost-cutting.
The Federal Government is not making savings for saving's sake.
First and foremost we have always pursued the goal of limiting current spending
to the necessary - so as to mobilize funds for shaping our future.
In the process it has become apparent that we in Germany do indeed need to change
the way we think, to enter a new mindset: to move away from the idea of clinging
to what we have and towards the idea of opening up future opportunities.
People have already started to think differently in the three and a half months
since we launched Agenda 2010: the change can already be felt.
This development has also been noted positively abroad: Germany is ready to change
itself. Germany is getting going.
Ladies and gentlemen,
With Agenda 2010 and the reforms to benefit the labor market and small and medium-sized
businesses, we have clearly mapped out the path towards the structural modernization
of Germany, towards innovation and the further evolution of participation and
justice. In the health sector, for example, we need more market economy, more
competition and more transparency. But we will not pursue these goals at the
expense of the outstanding quality of medical care in Germany.
As regards the labor market, the Hartz reforms that have already been implemented
in the low-wage and marginal jobs sectors have created greater job opportunities
than ever before.
With the establishment of Personnel Service Agencies and the contractual regulation
of temporary work we have not just given far more job seekers access to job opportunities.
We have also freed temporary work from its dodgy image.
The promotion of self-employment through the "Me Inc." initiative and
related measures is another scheme that has been avidly taken up.
I am certain that as early as next year we in Germany will have created a labor
market which is more open and flexible than it has been in decades. It is in
the interest of those who need workers and services. But above all it is in the
interest of those who are currently unemployed.
Ladies and gentlemen,
Naturally, our attention is turned in particular to small and medium-sized companies,
which generate well over half of gross value added in Germany and employ approximately
70% of the workforce.
You already know what the measures are. To recapitulate, they include:
•
amending the Crafts Code,
•
introducing a more flexible system of protection against dismissal,
•
fostering start-ups,
•
cutting red tape and
•
enabling businesses to build up their equity capital.
This is, mind you, supplemented by our strategy to reduce levies and ancillary
wage costs.
In other words, we are giving small and medium-sized businesses the opportunity
to show off to their full advantage the dedication and innovation which have
made our country strong.
The decision we took last weekend in Neuhardenberg is vital in this context:
small and medium-sized businesses will have to pay almost 10 billion euro less
tax from next year.
We are thus sending a clear signal to these companies in these difficult times:
lower taxes for more investment and more employment!
Ladies and gentlemen,
Structural reforms in the fields of pensions and health, on the labor market
and for small and medium-sized enterprises - taken together these yield the message
of Agenda 2010.
At root, all these measures have one and the same aim: to help us succeed in
taking the step towards greater responsibility, greater initiative and increased
public welfare. Towards enhancing future opportunities instead of doggedly preserving
the status quo. Towards a new balance between economic necessity, social cohesion
and renewal. That is what this Government wants.
Ladies and gentlemen,
We have this year fought hard to secure major opportunities for political reform. "Fought
hard" is indeed the right way to put it. For the process of gaining approval
for Agenda 2010 and the structural reforms was not easy, and - how else could
it be - painful for some. But today we can say that this process has succeeded.
The new mentality is taking root. People in Germany are ready to play their part
in this renewal.
I would like to expressly include the trade unions, without which - one cannot
say it too often - Germany would never have been as productive as it still is.
The trade unions have resolved various issues in their own ranks and the result
is clear: trade union members want to be participants in change. Not its victims,
nor the people applying the brakes.
The Government coalition has been as diligent in building a majority behind Agenda
2010 as the citizens can expect from those who bear the responsibility of governance:
it conducted an open debate, and thereafter stood united behind the outcome.
And determined to set the right course for our country and its future.
Ladies and gentlemen,
The Federal Minister of Finance presented a budget which takes account of the
economic and political requirements for this course.
This budget is guided by the aim of consolidation. It gets down to the business
of permanently dismantling subsidies. And it provides room for growth.
I am well aware that dismantling subsidies is a goal that everyone approves of
- unless it affects them personally. We are legally bound to grant many subsidies
over the long term, and so cannot immediately reduce them, even if economic reason
dictate that we do so.
Ladies and gentlemen,
Precisely because we have launched Agenda 2010, making progress with structural
reforms and precisely because we have decided to permanently dismantle subsidies
in the 2004 budget, we have created the leeway which allows us to bring forward
tax cuts and so provide vital impetus for growth and employment.
The business barometer provides encouraging signs and shows that we have to act
to make the most of these positive trends.
Under these conditions the third phase of the tax reform, long since agreed upon,
can be brought forward.
This is possible if and only if our structural reforms and dismantled subsidies
create lasting facts. But if it is possible, it has to be done.
Ladies and gentlemen,
Cutting taxes is always popular. But responsible politicians cannot be guided
by short-term euphoria. It was therefore not an easy decision to bring the tax
cuts forward. But at the end of the day it was clear that this signal for more
growth and employment made economic sense. It is not an unsecured bet on the
future.
Anyone who is seriously pursuing structural reform and dismantling subsidies
must also provide the impetus, so vital in such situations, for increased consumption
and investment. To do otherwise would be irresponsible.
Ladies and gentlemen,
Let me conclude by returning to a point I hinted at earlier on. We still have
difficult months ahead, during which great efforts will be required in order
to bring to fruition the changes that Germany needs. We look forward to constructive
cooperation with the majority in the Bundesrat.
The people in Germany do not want to witness party bickering. They want decisions
that do the country good.
The Federal Government is ready for this joint endeavor. It is very pleased that
the talks on the reform of the health system appear to be making good progress.
As a confidence-building measure we have thus postponed the final reading of
the relevant legislation in the German Bundestag.
However, we trust that this confidence will not be abused, but will be utilized
for further constructive cooperation. As regards pension insurance, I would like
to repeat that pensions have, as usual, gone up as of 1 July, i.e. from the day
before yesterday pensioners have been better off.
I would like to remind you once again that in the last legislative period we
reformed pensions by adding the fully-funded system to the pay-as-you-go system.
We have thus already tackled a topic in Germany that other partners and neighbors
still have ahead of them. But at the time we put too much faith in cyclical trends.
For this reason, and because of the dramatic demographic developments, we will
have to make some further structural amendments in this field, too.
The objectives are still that:
•
pensioners have a decent standard of living,
•
the working generations should only be burdened with contributions they can afford;
for this reason we want contributions to stay at 19.5%,
•
those who come after us should have a future in which they can make full use
of their abilities and their liberty.
Ladies and gentlemen,
Now, in the second half of 2003, this important year of reforms, we will focus
on how, and with which skills, the people in Germany can earn good money for
good work.
We are indeed undertaking these structural reforms for a single overriding reason:
So that Germany can remain a good welfare state with a modern economy.
We will thus push ahead at high speed as regards innovation, families, improved
education and care, better opportunities for research and development.
For what we want is not just a flash in the pan. Our message to the people of
Germany is not merely "we'll give you money - now go and spend it".
We are saying that it is worth living in Germany, investing in Germany and consuming
in Germany.
And we are saying, don't be misled by those who have already started issuing
warnings again and are undermining the impetus that we want the tax cuts to provide.
On 14 March I talked about the "know-it-alls" in the public arena.
About the people for whom everything goes either too far or not far enough.
Today I know that we have made tremendous progress. For today we have broad consensus
in society that Agenda 2010 is necessary and right.
And we have broad support from the population for the early tax cuts - from employees
and from all those who want to achieve something in this country.
What we are doing has been properly calculated. Germany can shoulder the burden.
Germany will make it.
The country is getting going. I hope that the bearers of political responsibility
outside the Government coalition will do so too.
Thank you.
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