Cablegate: Cdu Stumbles On Welfare Reform As Saarland Jumps

This record is a partial extract of the original cable. The full text of the original cable is not available.




E.O. 12958: N/A
SUBJECT: CDU Stumbles on Welfare Reform as Saarland Jumps
Ship to Endorse Schroeder Govt Plan


1. The CDU-led Saarland government has rejected a Christian
Democratic proposal for paying unemployment benefits at the
local level. Together with poorer CDU-led states in
eastern Germany, Saarland could give the Schroeder
government a Bundesrat majority on welfare reform -- and
hand a defeat to national CDU leadership. END SUMMARY.


2. Currently, the national government pays for the first 12
months of unemployment benefits, and local governments pay
for unemployment and social benefits thereafter. The
Schroeder government will alter the second tier of
unemployment benefits (Arbeitslosengeld II) so that after
12 months, unemployed individuals would receive reduced
benefits (at the same lower level as "Sozialhilfe" social
welfare payments) paid by the federal labor office. The
national CDU leadership criticized the SPD-Green proposal
as a power grab by the national government, and Hesse
Minister-President Roland Koch (CDU) introduced a plan
under which local governments will administer (and pay for)
the new second-tier unemployment benefits.


3. Saarland's State Secretary for Social Affairs Josef
Hecken (CDU) has rejected the CDU/Koch reform plan, calling
it an unfair burden to Saarland and other poorer German
states, particularly in East Germany. Hecken's office told
us that enactment of the "Koch/Merkel plan" (his quote)
would mean Saarland would lose over 100 million euros
annually versus under the current federal revenue sharing
scheme (Laenderfinanzausgleich). In defense of its
position, the Saar government cites a study by Georgetown
University lecturer Bernd Reissert showing that who pays
Arbeitslosengeld II is, in fact, very important. Reissert
describes unemployment benefits as part of a "hidden
revenue compensation scheme" channeling funds (EUR 4
billion net transfer per year) from strong states to those
with lower tax revenue and higher unemployment. Paying
benefits at the local level would potentially eliminate
this regional transfer payment.

4. Hecken recently told Saarland press that the CDU model
represents the "survival of the fittest," a threat to
solidarity and to the public finances and social policies
of Saarland and similar areas. He also criticized a CDU
proposal to alter a similar redistribution scheme among
health insurers (Risikostrukturausgleich Krankenkassen).
Hecken opines that the Schroeder government model likely
will receive a Bundesrat majority (suggesting Saarland will
not/not vote the CDU line on welfare reform).

--------------------------------------------- --

5. COMMENT. Reorganizing and reducing welfare payments is a
key element of economic reform. Hecken's announcement,
which was vetted by Saarland M-P Peter Mueller (CDU), is a
wake-up call for the CDU party leadership. Saarland's
rejection of the CDU/Koch proposal has political
significance beyond the issue of welfare reform:

-- It means that Schroeder government likely will obtain a
Bundesrat majority on this issue despite opposition from
the national CDU. While the national CDU leadership
rejected additional talks on the government's reform
agenda, Saxony M-P Georg Milbradt (CDU) said he would
welcome a summit with Schroeder if it would help his state.
The SPD-Green government potentially can use regional
transfer payments to prevail on other economic issues.

-- Welfare reform could become a significant defeat for CDU
chairperson Angela Merkel and for aspiring chancellor-
candidate Koch. Saarland's leadership is angry that Hesse
and Baden-Wuerttemberg dominated CDU policy-making on this
issue. The breakdown of party unity on welfare reform
shows CDU's vulnerability as it tries to govern in both
rich areas (Hesse, Baden-Wuerttemberg) and relatively poor
(Saarland, the new states).


© Scoop Media

World Headlines


UN News: Monkeypox Outbreak Can Still Be Contained, Insists UN Health Agency
The monkeypox outbreak that has been reported in 16 countries and several regions of the world can still be contained and the overall risk of transmission is low, the UN health agency said on Tuesday...

UN: “COVID-19 Is Not Over”, Tedros Warns World Health Assembly
The head of the World Health Organization (WHO) told global health Ministers on Sunday that although reported COVID-19 cases and deaths have declined significantly, it is not time to lower the guard... More>>

UN: Bachelet Calls On Mexico To Step Up Efforts As Tragic Milestone Reached Of More Than 100,000 Disappearances

UN High Commissioner for Human Rights Michelle Bachelet on Tuesday called on the Mexican authorities to step up efforts to ensure truth and justice for victims of disappearances, who now number more than 100,000, according to official data... More>>

Access Now: Elon Musk’s Twitter Buyout Must Not Come At The Expense Of Human Rights

Following today’s announcement that Elon Musk will acquire complete ownership of Twitter in a cash sale of around 44 billion USD, pending shareholder approval, Access Now urges Twitter’s Board, employees, and shareholders... More>>

UN: Biodiversity And Ecosystem Protection Highlighted On Mother Earth Day

Marking International Mother Earth Day, UN General Assembly President Abdulla Shahid urged on Friday, for collective action to safeguard biodiversity and protect ecosystems... More>>

Ukraine: Hundreds More Reach Safety After Fleeing Besieged Mariupol
In Ukraine, humanitarians said on Wednesday that hundreds of people have managed to reach safety after fleeing Mariupol, where there’s also been condemnation for the killing of Lithuanian filmmaker Mantas Kvedaravicius... More>>