This program is the necessary supplement to our structural reforms on the supply side, and I will come to this immediately. The two approaches are interdependent. Without structural reform, any boost in demand will fizzle out. And without boosting the economy from the supply side, reform will go nowhere.
That is why we are tackling the issue from both angles. As planned, we will implement the next phases of the tax reform to reduce the tax burden by around 7 billion Euros on January 1, 2004, and by an additional 18 billion Euros on January 1, 2005.
The starting tax rate will be reduced from the 1998 rate of 25.9% to 15%, and the top bracket will be lowered from 53% to 42%.
We cannot afford to do more. That must be made clear to those who keep suggesting tax cuts as a panacea to the point where the state has to pay out more than it collects. That is part of the reality in this country.
If we really wanted to implement the demands that were voiced – by no means would all of them come at the expense of the federal government, but rather also at the expense of state and local governments – then this would only be possible by increasing the debt or increasing excise taxes. There would be no other reasonable way to finance it.
[ . . . ]
Work and the economy are at the heart of our reform agenda. A dynamic, growing economy and a high employment rate are the prerequisites for a healthy welfare state and, thus, for a functioning social market economy. We will not abandon the goal of giving everyone who can work and wants to work the chance to do so.
Therefore, we have opened up the labor markets to new forms of employment and entrepreneurship. We have introduced the “Capital for Labor” program. We have thoroughly improved the conditions for placing unemployed persons in new jobs. And we have found a new balance between the rights and obligations of job seekers.
We are in the process of reorganizing the Federal Employment Service [Bundesanstalt für Arbeit] so that it can actually fulfill its primary task – placing unemployed people in jobs – instead of merely doing administrative work.
In the last few months, we – in some cases, jointly – have made great efforts to continue to increase labor market flexibility. We have removed the red tape associated with temporary work and have enhanced its status so that businesses can easily find the qualified workers they need. We have greatly reduced the social security taxes on low-paid jobs that pay up to 800 Euro per month.
We will continue to significantly improve these basic conditions for fighting unemployment.
Our job placement system has obvious weak points. In days of full employment, this didn’t matter, and since then we have spent twenty years discussing the issue without correcting the underlying problems.
We have now undertaken the necessary reforms. But now the firms that have vacancies to fill have to make use of these new procedures and regulations.
We have extended the length of time for which fixed-term employment contracts can be concluded, as was demanded. For people over fifty there is no time limit at all. This is also a measure to help older unemployed persons reenter the labor market. I am appealing to the business world to do this as well. It is not the responsibility of the federal government, but of business to proceed in a manner that gives people over fifty a chance to keep or return to their jobs. That is a responsibility that cannot be dumped solely on politics; rather, it concerns all of society and especially the economy. The economy and society must also assume responsibility for the community.
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