Schroder Aims At The Wrong Target

German business leaders cringed when Chancellor Gerhard Schroder weighed in on the European mobile-phone wars recently. Schroder's message? Vodafone PLC's AirTouch's aggressive attempt to take over Mannesmann isn't the way things should be done. Indeed, Schroder wants the European Union to do something about hostile takeovers. With German companies on a massive buying spree throughout Europe and America, Schroder's remarks are inappropriate, to say the least. German companies are already spending four times as much on foreign acquisitions than foreigners are spending in Germany. In fact, Mannesmann provoked Vodafone to action by acquiring its British competitor Orange PLC.

Hypocrisy aside, Schroder's remarks are typical of the German economic debate lately. Germany's political leaders should be talking about how they're going to ease the tax burden on business and create jobs. Instead, the left in Schroder's Social Democratic Party is debating ideas such as lowering the retirement age or reinstituting the wealth tax. Both have populist appeal. But they're economically dumb. A wealth tax would kill jobs by taxing people on the paper value of their stock holdings. It would hit entrepreneurs with low salaries and high stock options particularly hard. And why lower the retirement age when life expectancy is rising and the pension system is slipping toward insolvency?

Schroder hasn't been able to quell such talk. On the contrary, he has fed it with his comments on Vodafone and Mannesmann. Schroder seems to think a dash of populism will arrest the plunge in his poll ratings. Alas, it only underscores his inability to set a market-based economic agenda.

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