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November 22, 2002



German Chancellor Turns to Economy After Fraught Week

German Chancellor Gerhard Schroeder will be looking for good news on the German economy after a week of scandal and bankruptcy that can hardly have lifted his party's depressed ratings.

Six months before the general election, Schroeder's Social Democrats (SPD) are trailing the conservative opposition by four to five percentage points.

The chancellor will be hoping that economic data due this week will confirm the German economy, Europe's largest, is pulling clear of recession and can drown out his detractors.

In the past week, the scandal over donations to local SPD branches has mushroomed and Philipp Holzmann AG, the building firm whose 1999 rescue Schroeder championed, has filed for insolvency, becoming Germany's biggest corporate failure.

On Friday, Schroeder did manage to score a political win as his SPD squeezed a landmark immigration bill through the upper house of parliament, although it may yet prove a Pyrrhic victory as enraged conservatives promise to keep the emotive issue alive until the September 22 election.

Schroeder will need little reminding, however, that the economy is still the leading issue among voters.

"In 1994, the then centre-right government was lagging in the polls, but then you had an economic upswing and it won the subsequent election," said Bernhard Wessels, political scientist at Berlin's Free University.

Two indicators come out this week - March business sentiment, measured by the Ifo survey of over 7,000 companies, Today and January industry output numbers on Thursday.

Schroeder was keen to trumpet the fourth consecutive Ifo rise in February. It is expected to have risen this month too.

Most of Germany's media at the weekend was dominated by the fall-out from Friday's acrimonious passage of a law to allow a controlled stream of foreign workers into the country.

The conservatives say that at a time of high unemployment, Germany should be concentrating on limiting rather than increasing the number of migrant workers allowed in.

They branded the immigration bill's passage unconstitutional and have urged German President Johannes Rau not to sign it, saying they will take the matter to court if he does so. Top-selling newspaper Bild referred to the "trickery" of the chancellor, but analysts say he had needed to fight.

"A defeat would have been a catastrophe. It would have shown Schroeder was powerless to push through legislation. It's important as everything else seems against him," Wessels said.

Schroeder's challenger Edmund Stoiber and his Christian Democratic Union (CDU) and Christian Social Union (CSU) allies appear determined not to let the emotive issue of immigration die.

On Sunday, Stoiber declared that immigration had "automatically" become a key election topic.

"We have a strengthened government, but also a much more strongly bound opposition...It has been a win but a very costly one," said Richard Hilmer, director of the Infratest polling institute.

(China Daily March 26, 2002)

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