German political parties try to ease unemployment

Germany's two main political parties took another step toward a coalition with a deal to ease payroll taxes and labor market regulations in order to boost the lame economy, a senior negotiator said Wednesday. Conservative negotiator Roland Pofalla said he had also reached agreement with Social Democrat Chairman Franz Muentefering to cut Germany's crippling bill for unemployment benefits.

"What we promised in our election platform for labor and social security has been fully implemented," Pofalla said on n-tv television.

Joachim Poss, a senior Social Democrat lawmaker, said the agreement was an "acceptable compromise also for the unions," who have opposed any weakening of worker protections.

Chancellor-designate Angela Merkel's conservatives and the Social Democrats of outgoing Chancellor Gerhard Schroeder have been in coalition talks for weeks after neither won a majority with smaller partners in September elections.

The two sides aim to clinch an overall deal for a right-left "grand coalition" this week. It then needs approval at party conventions before parliament elects Merkel as Germany's first female chancellor on Nov. 22.

But they have yet to finalize tax hikes to plug a Ђ35 billion (US$41 billion) budget hole, amid criticism that it will further hamper an economy laboring under 11 percent unemployment.

Merkel's Christian Democrats campaigned with a pledge to raise sales tax from the current 16 percent, while the Social Democrats have sought an extra income tax for high earners.

Pofalla said he and Muentefering, who is expected to become vice chancellor and labor minister, agreed to slacken the tight regulation of Germany's labor market. As a result, new hires will enjoy protection against dismissal only after two years.

He said the parties would cut the bill for unemployment benefits by Ђ4 billion (US$4.7 billion) to help fund a one percentage point drop in the 6.5 percent payroll levy for jobless insurance paid equally by firms and workers, the AP reports.

The levy could be reduced by another point with funds from the proposed increase in sales tax, Pofalla said.

The parties are also reportedly close to a deal on nuclear power. The Sueddeutsche Zeitung, citing unidentified officials, said a plan to shut down all Germany's nuclear plants by about 2021 would remain, though the government would intensify research on developing new reactors.

T.E.