German opposition divided on crisis

THE GERMAN economy has entered a 'critical phase', the Economics Minister, Jurgen Mollemann, warned yesterday. Speaking on the final day of the budget debate in Bonn, Mr Mollemann said that the 'warning lights on the social and economic developments can no longer be ignored'. Most industrial indicators in western Germany were heading downwards, he said, with no prospect of relief from a recovery in exports.

'We are running the risk of a persistent overburdening of our economic capacity,' said the minister. Calling for an 'iron-hard savings programme' by the states in the west, Mr Mollemann said that if this failed, then tax increases could not be avoided. The minister, following the newly established course of the centre-right coalition, offered to co-operate with the opposition Social Democrats, saying that a 'new consensus' was needed to overcome the current social and economic difficulties.

Continuing its tough attacks on the government policies, the SPD made clear it was not prepared to help rescue Chancellor Helmut Kohl from his predicament. According to the SPD's deputy leader, and senior eastern politician, Wolfgang Thierse, the government's economic policy is having 'devastating effects' on the east. The violence, the racism, the neo-Nazism, were all signs, he said, of a society breaking under uncontrollable strain. Mr Thierse said the government had made a grave mistake in limiting the special unification income tax supplement to one year - it ended in July. New sources of money were needed.

As the first condition of co-operation, the SPD stated that Mr Kohl must finally open the nation's finances to public scrutiny. In addition, the opposition said the government must increase the funds for job-creation in the east; reverse the principle of restitution having priority over compensation on expropriated property in the east; and finally, raise taxes on the better off in the west.

Much of the sting of the SPD's tirade was drawn, however, by the fact that it is attacking from a position of internal weakness possibly graver than that even of the governing coalition. The SPD leader, Bjorn Engholm, is trying to push the party to the right by accepting changes that he feels are essential if it is to be regarded as fit to govern. The main changes are: tightening the constitutional clause on asylum, supporting a greater international security role for German troops than just UN blue berets, and tougher measures to combat organised crime, such as bugging private homes. All of these have been SPD taboos, and Mr Engholm's efforts are meeting stiff rank-and-file resistance.

It now looks as if Mr Engholm will have to face, against his will, a special party congress in November to debate these issues. Defeat for him would be disastrous, leaving not just the SPD in even greater disarray, but the chances of co-operation with Mr Kohl's government in tatters.