n an east German can be elected premier of a west German state—and no one in east or west finds this the least bit remarkable.”
Economic imbalance was also a factor in the higher incidence of right-wing extremism in eastern Germany than in the west. To cope with the backlash against the presence of foreigners in Germany, Interior Minister Otto Schily announced the creation of a national commission to root out the causes of xenophobia. Schröder made far-right extremism a top theme during a 40-stop tour he made in eastern Germany in late August and early September, although he was careful not to single out easterners as the sole perpetrators—anti-Semitic attacks in Düsseldorf in July and October were just two examples of right-wing violence in western Germany.
Likewise, efforts continued in Germany to cope with the country’s Nazi past. A joint public and private foundation called Remembrance, Responsibility and the Future was created in July to supplement existing restitution arrangements for forced labourers and other victims of Nazism with up to $5 billion in funds. Many forced labourers had been impressed into service in Eastern Europe and were not Jewish, factors that had excluded them from sharing in about $100 billion in compensation that Germany had already paid out since World War II. The creation of Remembrance, Responsibility and the Future capped nearly two years of international negotiations under pressure from the U.S. that class-action suits might be filed on behalf of victims of Nazism.
Following the passage of a landmark tax-reform bill in July, Schröder exclaimed, “The term German disease now belongs to the past. This is a good day for Germany’s reputation in the world.” Efforts to change the tax system had been under way since 1990. The victory was all the sweeter considering that the chamber in which the coalition received the majority of votes, the Bundesrat, was the one in which it had lost its majority in 1999. Furthermore, it was the same body in which the SPD had used its majority in previous years to block the tax-reform bills of the Kohl government. The SPD managed to have its way by offering inducements to defect and vote for the SPD-Green bill to state governments of Bremen (ruled by an SPD/CDU coalition), Berlin (ruled by a CDU/SPD coalition), and Brandenburg (ruled by an SPD/CDU coalition). In the end, the Schröder government won in a vote of 41–28, even though it needed only 35 votes. The law, which was scheduled to take effect on Jan. 1, 2001, created DM 50 billion (about $22 billion) in tax breaks through the year 2005. Bundesrat passage came only after an overnight session of cajoling, in which the coalition managed to wring out concessions. The bill was touted as a key to attracting more investment in Germany by harmonizing the tax-rate structure with those of other industrialized nations. The bill lowered the top personal income tax rate to 42%, down from 51%, and the corporate tax rate to 25%, down from 40%. The decision to eliminate the tax on sales of corporations (set to start in 2002) was welcomed by industry as a step that would make sweeping corporate restructuring possible. German business leaders had viewed this tax—set at about 50%—as punitive.
The second item on the landmark reform agenda was pension reform. The projections were compelling: if in 2000 there were 47 retirees for every 100 members of the workforce, by 2050, it was projected, there would be 104 retirees for every 100 workers. The challenge posed by these demographic trends, one that the SPD-Green government had inherited from its predecessors of the Kohl era, was to find the right balance and timing for increasing pension contributions and reducing pension payments. Reaching agreement within the SPD and Green coalition was a feat in itself, accomplished only after an all-night session ending November 14. During December the coalition tinkered with draft legislation to make it more acceptable to the opposition, but by the end of the year it was still too early to schedule a vote for this long-sought piece of legis