Germany - Domestic policy

The major issues that Schröder faces include unemployment, the overburdened welfare system, and the immigrant question. In the beginning of 2002, Germany's unemployment rate was 10.6% with over four million unemployed workers. Schröder pledged that he would bring 100,000 unemployed youths into training programs. He also emphasized that a more flexible organization of work was needed and that business should invest in and modernize their industries. In eastern Germany, unemployment rates were nearly double the national average, with one in five people of working age out of a job. Schröder has promised to foster reconciliation in a country still divided by economic inequalities. The Social Democrats and Greens agree on the need to bring together employers and labor unions to discuss a program to create jobs, perhaps through pledges of wage restraints from unions and pledges of jobs from employers. However, strict regulations make firing employees difficult, while unemployment benefits are generous enough that most recipients make more money by remaining unemployed. The cost of hiring a German worker is among the highest in the world.

While Schröder supports Germany's generous welfare state, he is searching for ways to adapt Germany's expensive welfare system to global competition and reduce the tax burden on citizens. Partly due to the high expenditures in eastern Germany after unification, and partly because of competition with other countries, Germany can no longer afford to maintain the restrictive labor laws, ample pensions, and generous health care system. Schröder has said that the welfare state has reached its limits and has emphasized the need to balance social compassion with fiscal prudence. Both the Green Party and the SPD seem united in a desire to preserve at least the foundations of the welfare system against more radical free-market reforms. Schröder hoped that appointment of Oskar Lafontaine as finance minister would aid in the defense of minimum social, ecological, and welfare standards against the deregulation that global markets tend to inspire, but in fact, Lafontaine resigned in 1999 when the economy lagged. Germany currently spends nearly 50% of its gross domestic product (GDP) on government expenditures. In February 2003, when the SDP suffered its worst showing ever in regional elections, Lafontaine seemed poised to reenter the political scene, this time as an opponent of Schröder.

Under the Schröder government, immigration laws seem likely to change. The treatment of Germany's seven million immigrants has been a salient issue in past elections. Schröder pledged that his government "will make it possible to have dual citizenship," allowing many German-born children of immigrants to become citizens. The SPD has traditionally been more open to integrating non-Germans into German society. In 1999, the Schröder government changed the citizenship laws to allow people who have lived in Germany for eight years or longer to apply for citizenship. (Citizenship was formerly open only to those whose parents were born in Germany.)