SOUTHWEST SPD SPLIT ON SCHROEDER'S AGENDA 2010

UNCLAS SECTION 01 OF 03 FRANKFURT 003948

SIPDIS

SENSITIVE BUT UNCLASSIFIED

E.O. 12958: N/A
TAGS: PGOV PINR ECON ELAB SCUL GM
SUBJECT: SOUTHWEST SPD SPLIT ON SCHROEDER'S AGENDA 2010



1. (SBU) Summary: Many in the Social Democratic Party (SPD)
in Baden-Wuerttemberg (B-W),Hesse, Rheinland-Pfalz (R-P)
and Saarland are fiercely opposed to Chancellor Schroeder's
Agenda 2010 reform plan. In B-W and R-P, the SPD leadership
generally approves the Schroeder plan but the rank-and-file
does not. In Hesse and the Saarland, SPD party leaders are
determined to water down the proposed reforms. Saarland's
SPD chairman Maas is in the lead in opposing Agenda 2010,
grabbing it as an early campaign theme for 2004 state
elections. (See also septel.) End Summary.

New Hesse SPD leader Aligns with Unions - Party Split
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2. (SBU) New Hesse SPD Chairperson Andrea Ypsilanti, elected
in March 2003, has vowed to resist reform proposals that
would lessen the clout of Germany's strong trade unions.
She has been particularly vocal in favor of maintaining
Germany's generous legal protections against the dismissal
of employees. She has said on national television that
Agenda 2010 needs to be more socially equitable. To the
annoyance of her predecessor, former Hesse Minister
President and current Federal Finance Minister Hans Eichel,
she has continued to emphasize these themes. (Eichel finds
Ypsilanti's approach too extreme.) Together with Saarland's
SPD Chairman Heiko Maas, Ypsilanti is one of the most
outspoken critics among SPD state leaders of the Agenda 2010
reform plan.


3. (SBU) In a conversation with the Consulate, Ypsilanti
proposed the following changes to Agenda 2010:

- Re-introduction of a wealth tax and reform of the
inheritance tax. (She refers to a verdict of the
constitutional court next year and expects that the
inheritance tax will need to be reformed anyway.)

- A citizens' health insurance ("Buergerversicherung").
(Basic insurance for all, all must contribute, premium could
be privately insured.)

- The definite withholding tax has no majority in the
party. "It is dead," Ypsilanti said.

- A tax on companies that do not offer apprenticeship
positions (Ausbildungsplatzabgabe). Ypsilanti thinks
Schroeder will have to act on that soon.

- Changes to the reform of unemployment benefits.
Ypsilanti wants to use the model worked out by the
"Bertelsmann Foundation" that says unemployment benefits
should be 10 percent above welfare.


4. (SBU) Ypsilanti held a joint press conference with Hesse
German Trade Union Federation (DGB) chairman Stefan Koerzell
on Agenda 2010 to show public support for the unions, but
her views are not uniformly supported in the party. Newly-
elected Hesse SPD Caucus Leader Juergen Walter has
criticized the unions for being backward-looking. "It
cannot be in the best interest of the unions to drive the
social security system over the brink," Walter said. North
Hesse party chairman Manfred Schaub, number three in the
Hesse SPD, criticized Ypsilanti and other rebels in the SPD
for using a membership poll (Mitgliederbegehren) to pressure
the party leadership. "There is no alternative to the
Agenda 2010," Schaub said. He is proposing to make the
program more socially equitable and have more tax-based
elements to include groups do not currently participate,
such as the self-employed and public servants.

Saarland's Heiko Maas - A Mediator Among the Opponents
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5. (SBU) The Saarland SPD has been more united than Hesse
in its opposition to the Agenda 2010 reforms (see septel).
State Chairman Heiko Maas gathered moderate opponents of
Agenda 2010 presenting a paper May 4. Maas told us he
expects Agenda 2010 will achieve a majority at the SPD party
convention June 1, but he still hopes to make changes. He
proposes a more differentiated model of unemployment
benefits in favor of older employees. In addition, he would
like to see the planned 2004 lowering of the top income tax
delayed and replaced with accelerated tax cuts for low-to-
middle incomes. Maas also rejects the definite withholding
tax and wishes to introduce more tax-based elements into the
social security system to broaden its financial base. To
maintain social equity, Maas would like to reintroduce the
wealth tax and a reform of the inheritance tax. He suggests
private elements in the pension system "systematically
strengthened."


6. (SBU) Maas' political problem is that he feels strong
pressure from the left, namely from former SPD chairman
Oskar Lafontaine and Ottmar Schreiner, leader of the twelve
"Agenda 2010 rebels" in the Bundestag. While Maas has not
permitted Lafontaine to play a major political role, Maas
has less influence over Schreiner, who is respected in the
Saarland SPD for his thoughtful, critical views. Maas
countered this threat to his authority (as party insiders
describe it) by working out a six-point position paper that
will be voted on a party convention May 15. The paper seeks
to build a common ground with other critics of the Agenda
2010, for example, in Hesse.
B-W Leadership Surprised by Growing Opposition
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7. (SBU) Baden-Wuerttenberg (B-W) SPD Chairperson Ute Vogt
admitted in a recent interview that she had underestimated
the growing unease in the party over Schroeder's Agenda

2010. She criticized the unions for attempting to turn the
SPD into a pawn. "I almost threw my Ver.di-membership book
away," Vogt said. According to Vogt, there are problems
with Schroeder's merger of unemployment and welfare
benefits. Unhappiness with Agenda 2010 has not resulted in
a significant loss of SPD membership, however. Between
January and March, 129 members left the party, not an
extraordinarily high number. Vogt defended Schroeder's plan
as an absolute necessity. Wolfgang Drexler, SPD caucus
chief, supports her as most of the members of the SPD caucus
in the B-W State Parliament do.


8. (SBU) One of the first prominent SPD members openly
opposing Agenda 2010 was Rainer Bliesener, the B-W Chief of
the German Trade Union Federation (DGB). Bliesener called
for a special convention in B-W to discuss the reform.
Bliesener criticized in particular the reduction of
employment benefits and the proposed changes to German labor
law. Along with Bliesener, several SPD sub-organizations in
B-W with a considerable share of union members have voiced
their distress at the Chancellor's plan. The SPD rank-and-
file is critical of Vogt's unwavering support of Schroeder.


9. (SBU) The tensions within the B-W SPD have grown
steadily in recent weeks. Members of the SPD's left wing,
led by Ulrich Maurer, former State Chairman and mentor of
Ute Vogt, and Hilde Mattheis, the SPD's deputy party leader,
are organizing under the logo "BWL" (Baden-Wuerttemberg
Left) to protest Agenda 2010. Maurer and Mattheis are also
the most prominent Social Democrats thus far to sign a
manifest entitled "reforms are necessary." The four-page
paper explains in detail why Schroeder's proposals are not
feasible.

Rheinland-Pfalz SPD stands firmly behind Agenda 2010
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10. (SBU) Leadership as well as rank-and-file members of
the Rheinland-Pfalz (R-P) SPD stand behind Schroeder's
reform plans. Minister-President Kurt Beck, who represents
the moderate wing of the SPD, has clearly spoken out in
favor of Agenda 2010. According to Beck, Agenda 2010 is an
absolute necessity and there is no turning back. In
conversations with SPD contacts we were told that Andrea
Nahles, the former national chief of the SPD youth
organization JUSOS critical of the Schroeder plan, is not
representative of R-P SPD. In addition, Dietmar Muscheid,
the DGB chief for Rheinland-Pfalz has also taken a rather
moderate position. The SPD leadership is aware of the fact
that Agenda 2010 can only be a first step and that much
deeper cuts will be needed in the future, particularly in
the health-care and pension system.


11. (SBU) There is also agreement within the R-P SPD that
some measures of Agenda 2010 have to be discussed in more
depth. For example, Schroeder's proposal to limit the
length of unemployment benefits for employees 55 years and
older to eighteen months does not consider the fact that
this segment of the population may never find work and
cannot just be left out in the cold. Malu Dreyer, R-P
Social Minister, admits that Germany's social welfare system
needs a complete overhaul. Clinging to old measures will
not help to bring the desired relief, Dreyer said.
Nevertheless, the changes in the system should be socially
balanced. Dreyer also criticized Schroeder for combining
approval of his agenda with yet another vote of confidence.
This is the third time he has resorted to this strategy and
it is wearing thin, Dreyer said.

Comment
--------------


12. (SBU) Opposition to Agenda 2010 is strongest in the left-
leaning Hesse and Saarland SPD. While Saarland SPD chairman
Heiko Maas has managed to unite his party behind a critical
position paper, the Hesse SPD remains split. This has
partly due to with the still relatively weak leadership of
Andrea Ypsilanti, but also with a traditional shift between
the more left leaning south and the more moderate north
(Hans Eichel's home). Maas has much to lose at home with
state elections coming up in fall 2004. Saarland is the
first state the SPD has a realistic chance of winning back
from the CDU next year. This will only succeed if Maas can
prove he is independent of the old guard. In the state,
which is the most highly unionized in Germany, Maas has
little choice but to oppose major points of Agenda 2010.

13. (SBU) In Rheinland-Pfalz, the SPD stands firmly behind
the Chancellor's concept. The party leadership and grass
roots members accept the overall plan. There is widespread
recognition within the party that clinging to old concepts
will endanger the whole social system and that there is no
alternative to the Schroeder plan. In B-W, things are not
as simple. Although the majority of the leadership stands
behind Agenda 2010, there is a small but strong opposition
toward the reform plan that has joined forces under the logo
"BWL" (Baden-Wuerttemberg Left). Nevertheless, we expect B-
W state leader Ute Vogt to keep the opponents of the Agenda
under control. End Comment.

BODDE