Schröder, Stoiber Find Differences in Second Debate

German Chancellor Gerhard Schröder and his opposition challenger, Bavarian Premier Edmund Stoiber, both say they want to ratchet up the pressure on unemployed to find new work. But that's about the only thing they could agree upon in their second newspaper debate, published Tuesday in the "Süddeutsche Zeitung" and "Die Welt."

"We need to change the sanctions that are imposed if a person doesn't accept a reasonable job," incumbent Schröder told the newspapers.

Stoiber, meanwhile, said that if elected, the two parties he represents – the Christian Democratic Union and its Bavarian partner, the Christian Social Union – would introduce regulations with stricter conditions on the payment of unemployment benefits.

Challenger: You've got a shabby economic record

In the most acerbic comments made during the interview, Stoiber accused Schröder of failure in the battle against Germany's high unemployment rate and further lashed out at Schröder and his government for "ruining the nation's fiscal foundations."

He said laws passed by the government -- a coalition between the Social Democrats, led by Schröder, and the Greens -- had made it more difficult for small- to medium-sized businesses to survive. Schröder, however, defended his reforms, saying corporate taxes in Germany fall within the lowest third of the average European rates. Under the red-green government, he said, a fairer system of taxation had been introduced for companies.

But Stoiber countered that the government's tax reforms were responsible for tax revenue shortfalls this summer that threaten to push Germany into non-compliance with the European Union pact ensuring the stability of the euro. Germany is currently on the verge of triggering an automatic and humiliating warning letter from Brussels.

Schröder: Blame Kohl

Schröder partially blamed the current shortfalls on tax credit vouchers issued under the government of former Chancellor Helmut Kohl. Those vouchers are only being cashed in by companies now, as the economy stagnates.

"We're paying the tax credits now that piled up during the Kohl administration," Schröder said.

For his part, Stoiber denied the charge, claiming it was the government's corporate tax reforms that led to the shortfall. He described the corporate tax as a "grave error" that now threatened to push the country over the eurozone's three-percent deficit spending limit.

In order to make muddy economic waters more navigable for small companies, Stoiber said the Union bloc would seek to change the country's Codetermination Acts, which give employees an important say in a company's management decisions. "Mid-sized businesses suffer extraordinarily under this legislation," Stoiber said, citing the burdens additional regulations often bring to small firms.

Schröder cites successes

But Schröder defended his government's labor market policies of the past four years, including the red-green government's plans for reform. The problem, he said, is that many people are afraid of change because they fear things will deteriorate before they get better. But that wouldn't be the case under new reform plans, he said.

Over all, he spoke positively of the work his government has undertaken. "We have proven that we have tackled some important areas ignored by our predecessors," Schröder said.

As examples, he cited the reduction of the public debt, the reform of Germany's pension and tax systems and a new citizenship law passed by his government that greatly reduces the red tape and amount of time it takes to become a naturalized citizen.

During the past several weeks, Schröder and Stoiber have participated in debates in three major German newspapers. Their first televised debates are scheduled for August 25 on the private television stations RTL and Pro 7. A second and final debate is scheduled for Sept. 8 on the public television broadcasters ARD and ZDF.