Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Schroeder's Fiscal Reforms Gain Speed

FRANKFURT, Germany -- Chancellor Gerhard Schroeder gained ground this week for his politically divisive plan to overhaul Germany's paralyzed economy as new statistics showed how desperately the country needs a jolt.

Schroeder , who has been facing a rebellion from labor unions and other leftist elements of his governing Social Democratic Party, won a resounding vote in favor of the plan from top party officials.

While the vote will not silence dissenting voices within the party, it will make it harder to derail the chancellor's proposals to shake up Germany's labor market and scale back its generous pension benefits.

A survey by the Ifo Institute, an economic research organization, showed that the confidence of German business people eroded further in April to its lowest level in 16 months. The government cut its forecast of growth this year for the second time in three months to less than 1 percent.

"At the end of this year, Germany may have 5 million people out of work," said Klaus Zimmermann, the president of the German Institute for Economic Research in Berlin. "Schroeder knows he has to push for reforms now, or he can forget it. If he fails here, he will have to step down."

The chancellor is casting the political battle in the same do-or-die terms. Before the meeting of Social Democratic leaders today, he hinted that he would resign if he did not win their support. "Whoever wants to approve or push through something different must know that he would deprive me of the basis for work and force me to face the consequences," he said to reporters in Berlin.

Schroeder has said this before -- most recently in December, when members of his party rebelled over proposed tax increases. Given that he has no clear successor, either in his party or in the opposition, his statements are seen as negotiating ploys rather than threats.

Schroeder is seeking a reform package that would, among other things, make it easier for companies to lay off workers and reduce the amount of time unemployed people can receive benefits.

Labor leaders have criticized the proposals as socially unjust. They would prefer that the government raise taxes on inheritance and capital gains. A proposal to tax profits made on the sale of stocks -- an apparent effort to mollify the critics -- was floated and later withdrawn.

Schroeder stirred further ill will last week when a government commission proposed raising the retirement age and penalizing those who retire early.

The unions said the government was exaggerating the cost of Germany's pension benefits. Several of the largest unions will mark the Labor Day holiday Thursday with a nationwide protest against the plan.

Facing down the unions is a considerable risk for Schroeder . They form the bedrock of his party, and their turnout was crucial in his razor-thin victory over the conservative opposition last fall.

Political experts say Schroeder is calculating that the leftist elements in his party will come to heel rather than risk being dethroned by the conservative Christian Democratic Union. The opposition has vowed to block the plan in Parliament, which may help him to build a sense of solidarity.

On June 1, the chancellor will face a vote at an extraordinary party conference in Berlin. Monday night, in shirt sleeves, he made an impassioned sales pitch in Bonn, saying other European countries had undertaken similar reforms.