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Thursday, December 19, 2002

German Doldrums

Two pieces of news from Germany this morning which may be more related than they appear at first sight. The first is the decision of the country's highest court to strike down the new landmark immigration law after procedural objections by the opposition.The ruling by the federal constitutional court means the law, simplifying and modernising Germany's complex immigration rules to allow greater access for well qualified candidates from outside the European Union, will not come into effect on January 1 as planned. The second is the fact that German business confidence deteriorated for the seventh month running in December (although it did show signs it might start to pick up again soon). The Ifo economic institute on Wednesday said that its business climate index fell to 87.1 this month from 87.3 in November. Now while these two items are clearly not related in the sense that there is any evident causal mechanism which links them, German business men and women do have good reason to lack confidence in a population which is now in natural decline (ie live births are now less than deaths) and which repeatedly demonstrates its inability to open itself to the world:

The constitutional court upheld the argument of six opposition-governed states that last March's controversial Bundesrat immigration vote was invalid. The case stemmed from differences between the government and opposition regarding the treatment of the decisive vote cast by Brandenburg, a state run by a "grand coalition" of the CDU and the Social Democratic party (SPD).The ruling came against a background of wage strikes by public-sector workers and followed the government's embarrassing need this week to offer the CDU extensive concessions to ensure support for its ambitious job placement and labour market reforms
Mr Schröder's difficulties were further underlined on Wednesday with the latest Ifo index of business confidence, showing its seventh consecutive monthly fall. Separately, a new opinion poll revealed that Mr Schröder's SPD was trailing the opposition by 21 percentage points.
Source: Financial TimesLINK

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