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Chancellor Gerhard Schröder Introduces "Agenda 2010" (March 14, 2003)

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Ladies and gentlemen, I have also mentioned the motto “Courage for change” in the context of our domestic affairs in particular. In order to live up to our German responsibility within and for Europe, we must be prepared to undergo a transformation here at home. Either we modernize, and I mean as a social market economy, or we will be modernized, and here I mean by unchecked market forces that push social considerations to the margins.

The structure of our social welfare system has remained virtually unchanged for fifty years. In some instances (for example, the burden of labor costs), instruments of social security are even leading to the creation of new injustices. Between 1982 and 1998 alone, non-wage labor costs rose from 34 to almost 42 percent.

There is only one possible way to respond to this: it is imperative that we restructure and modernize the welfare state. The point is not to sound the death knell for the welfare state, but rather to maintain its substance. That is why we need comprehensive reforms.

[ . . . ]

Our Agenda 2010 includes far-reaching structural reforms.

These reforms will help Germany reclaim a leading position in prosperity and employment by the end of the decade.

They will help ensure that equity is maintained between the generations, and they will help strengthen the foundation of our state.

Ladies and gentlemen, I promised that I would explain the measures we are planning in the areas I mentioned on a point-by-point basis.

These measures focus on three main areas:

The first is “economic growth and the budget.” The dire state of the economy forces us to find a new balance between consolidation, stimulus, and tax relief.

We will not pursue a one-sided, egotistical path that reduces the burden on us today, but shifts the costs to future generations by running up debt. That is not a responsible path.

For this reason, we will adhere to our goal of budget consolidation and to the framework agreed upon in the Stability Pact. This pact, however, cannot be interpreted in a static sense.

It leaves room, and it must leave room, to react to unforeseen events. Phases of economic weakness – presently we are in such a phase in Germany and Europe – should not result in pro-cyclical policies.

We in Europe agree with our partners that we also need options for reacting to unforeseen events [in the world economy] that might result from the intensification of crises in different regions of the world. The Stability Pact also offers this option. We will make proactive use of these options together with our partners.

However, the Stability Pact and European responsibility should not be used as an excuse for inaction here and now. Even in the present situation we want and need new impetuses for growth. This means encouraging both private and public investments, especially by local governments.

We are obliged, precisely in periods of low growth or economic stagnation, to keep public investment at a high level.

The federal government – and we will discuss this during our budget consultations – is definitely living up to its responsibility.

Investments earmarked in the federal budget have increased this year to 26.7 billion Euros.

But we will also have to enhance the financial strength and investment capacity of local governments on a long-term basis.

[ . . . ]

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