US embassy cable - 03FRANKFURT2252

UNCLAS SECTION 01 OF 02 FRANKFURT 002252 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: PGOV, PREL, PINR, ECON, GM 
SUBJECT:  RHINELAND-PFALZ OFFICIALS CALL FOR DRASTIC 
ECONOMIC REFORMS 
 
 
1. (SBU) Summary: In meetings with the Consul General on 
March 11 and 12, Rhineland-Pfalz Minister for Economics, 
Transportation, Agriculture and Viniculture, Hans-Artur 
Bauckhage (FDP) and State Secretary Karl-Heinz Klaer (SPD), 
Representative of the State in Berlin and Brussels, called 
for comprehensive and speedy economic reform in Germany. 
Both politicians agreed Germany needs reform but doubted 
whether Chancellor Schroeder had the political will to do 
battle with the unions and the left wing of the SPD. 
Bauckhage indicated that the support for the national 
coalition could erode even further if unemployment remains 
close to five million by the end of the year.  Klaer and 
Bauckhage regretted the ongoing tensions in German-American 
relations.  End Summary. 
 
2. (SBU) Rhineland-Pfalz Minister for Economics, 
Transportation, Agriculture and Viniculture, Hans-Artur 
Bauckhage (FDP) and State Secretary Karl-Heinz Klaer (SPD), 
Representative of the State in Berlin and Brussels, met with 
the Consul General on March 11 and 12.  Klaer stated that 
the CDU majority in the Bundesrat creates a difficult 
environment for the SPD-Green Party government.  If 
Schroeder had a cabinet as good as Roosevelt's, he could 
push forward regardless, but he does not.  Negotiating 
compromises on legislation costs valuable time.  According 
to Klaer, Schroeder should copy Clinton's strategy and co- 
opt some of the opposition's ideas.  He noted that for 
Schroeder this would mean loss of the support of the SPD 
caucus, however. 
 
3. (SBU) Much will depend on Schroeder's major policy speech 
on Friday, March 14.  Expectations were raised too high, 
Klaer said, making them too hard to meet.  Recalling his 
experience as speechwriter to former chancellor Willy 
Brandt, the proven strategy is to lower expectations 
beforehand, giving the policy speech more room to succeed. 
He also emphasized that Rhineland-Pfalz Minister President 
Kurt Beck (SPD) made clear to Schroeder that the current 
economic situation is truly dire.  Klaer said that Schroeder 
must announce drastic reform measures, even if it means a 
further loss of electoral support.  Schroeder's problem will 
be with the SPD Bundestag caucus, however, not with the SPD 
party, which he described as "virtually dead."  Klaer was 
also very critical of the 2000 tax reform.  A reform of the 
federal-state revenue sharing system was needed along with 
it: tax reforms alone are useless. 
 
4. (SBU) Klaer regretted the tensions in German-American 
relations and stated that Minister-President Beck would 
personally insist on ensuring that the U.S. military will be 
able to perform its missions from Germany during a possible 
Iraq war.  Security measures to protect American 
installations will be further enhanced in case of a military 
conflict. 
 
5. (SBU) Klaer, who is also the state's representative in 
Brussels, is satisfied with the progress of the European 
Convention.  A result can be presented at the end of 2003, 
which then has to be passed by the EU member states. The EU 
expansion candidates are also represented in the convention. 
He reported that in the beginning Great Britain tried to 
dominate the Convention but failed.  The Convention is 
following the 200-year-old American constitutional example. 
 
6. (SBU) Economics Minister Bauckhage expressed similar 
concerns about the state of the German economy. Germany's 
social system and its bureaucratic apparatus need a complete 
overhaul.  Bauckhage stated that Minister-President Beck 
also considers drastic reforms essential and unavoidable. 
Unlike Klaer, however, he could not assess the degree of 
Beck's influence on the national SPD leadership.  Bauckhage 
felt Germany was in danger of sliding into the same 
situation as Japan.  "The door to deflation has been 
opened," he said.  People have lost faith in the government, 
they are saving their money and consumption is collapsing. 
He also criticized the planned investment program of the SPD- 
Green government as ineffective: he doubts that Schroeder 
has the political will to push through reform.  He predicted 
that the national government might sail into heavy weather 
if unemployment is still close to five million by the end of 
2003, but admitted that the problems date back to the late 
years of Chancellor Helmut Kohl's administration.  The FDP 
should have left the national coalition when the CDU failed 
to implement tax reform.  Bauckhage also called for a 
simplification of the German tax system.  "Everyone in the 
Chancellery should take Economics 101," he said. 
 
7. (SBU) Bauckhage also emphasized the need for an 
effective, rational immigration law.  Immigration is an 
emotional issue and should be handled with care by all 
parties.  There are certain taboos in Germany, which should 
not be touched by politicians, referring to Moellemann's 
controversial campaign brochure, viewed as anti-Semitic, 
which Bauckhage felt cost the FDP and the CDU the election 
victory last fall. 
 
8. (SBU) Bauckhage also criticized Schroeder's strategy of 
playing the Iraq card during national and state election 
campaigns.  Schroeder's foreign policy has already created 
problems in diplomatic circles and might lead Germany into 
international isolation.  He said the strained bilateral 
relationship will have a negative impact on U.S. military 
installations in Ramstein and Spangdahlen, which are of 
considerable economic importance to the state.  Bauckhage 
worried that troops now deployed in Iraq may not return to 
Germany. 
 
9.  (SBU) Comment: The SPD-FDP coalition in Rheinland-Pfalz 
is unique in Germany.  Both coalition partners agree that 
drastic reforms are needed at the national level 
immediately.  There is palpable concern, however, in both 
the Rheinland-Pfalz SPD and FDP, that resistance to change 
in unions and the SPD Bundestag caucus is too great. 
Schroeder might fail in his efforts to move the country 
forward.  The Rheinland-Pfalz SPD hopes that Minister- 
President Beck, who supports reform, can use his influence 
at the national level to help move things in the right 
direction.  There is also real concern in the state about 
tensions in the German-American relationship.  With two 
large U.S. military bases in economically weak regions, 
thousands of jobs could be lost if bases downsize or close. 
In addition to the already desolate economic situation, 
leading politicians in the state are afraid that U.S. troops 
might leave Rheinland-Pfalz.  End Comment. 
 
10. (U) This message was coordinated with Embassy Berlin. 
 
BODDE