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Commentary: Mr. Schroder, You're No Tony Blair (Int'l Edition)

International -- European Business: COMMENTARY


Gerhard Schroder, Prime Minister of Germany's state of Lower Saxony, likens himself to Britain's Tony Blair. He hopes the comparison will help in September's Parliamentary elections, when he will run as the Socialist candidate against Chancellor Helmut Kohl. The goal is to convince voters that he, like Blair, is a moderate Socialist who can lead his nation into a new era of growth and labor cooperation.

Lot's of luck with that one. A more realistic comparison is Schroder and a less pragmatic European Socialist, French Prime Minister Lionel Jospin. Schroder may mouth Blair-like pro-business rhetoric, but his record has been that of a big-spending, big-government dirigiste. And like Jospin, Schroder is pressured by activists in his Social Democratic Party not to move too far toward the center. A further similarity, notes Michael C. Burda, an economist at Berlin's Humboldt University: "Germany and France never had the cold bath of Thatcherite reforms that Blair is benefiting from now."

It's unclear whether Schroder even wants to implement pro-business reforms such as looser labor laws and spending cuts. Early rumblings indicate that he may roll back what minor tax and spending cuts Kohl's government has made. Even if Schroder has the will, he may not be able to muster the clout. Germany's government likely will remain gridlocked, and any reforms he's able to pass will be tepid.FRENCH ACCENT. Optimists hope Schroder will run a center-left campaign, then ram through a pro-business agenda once elected--much as Blair has solidified Thatcherite reforms. But his eight-year state record suggests that's wishful thinking. Government debt is up by two-thirds, and unemployment is 12.6%, two points higher than in the rest of western Germany. Schroder says the state's economy has suffered from the high costs of reunification.

Still, he tends toward interventionism in the grand French style. Jospin's 35-hour workweek fiasco pales in comparison with the costly 28-hour workweek Schroder helped pass to avoid job cuts at Volkswagen. Then, in January, when an Austrian company threatened to take over Preussag, a lagging local steelmaker, Schroder bought 51% of the company for $550 million just to forestall layoffs.

Like Jospin, he faces heavy political pressure from the left. Disliked by SPD rank-and-filers, Schroder will need help from party chief Oskar Lafontaine, a socialist with a mere 1% approval rating from business. Also like Jospin, who governs in a coalition with the Communists, Schroder is unlikely to win enough votes to form his own government. The likely alternative, an alliance with the Greens, will only intensify the left's influence.

Schroder may yet find a way to make reforms if he wins. But like Jospin, he is likely to take many halfway measures. That's probably the best Germany can expect.By Thane Peterson

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