Schroeder criticised for east German aid threat

Schroeder: Aid depends on backing for pension reform

ILMENAU, Germany (Reuters) -- Opposition leaders in east Germany have attacked Chancellor Gerhard Schroeder for threatening to block aid to the region if they fail to cooperate on an economic reform plan.

Schroeder indicated on Monday, at the start of a two-week tour through the east of the country, that future financial assistance depended on local state leaders from the opposition Christian Democrats (CDU) backing his efforts to reform the country's pension system.

But Thuringen state premier Bernhard Vogel accused Schroeder on Tuesday of trying to run politics like a "second-hand bartering market" and said aid to the region was a "national duty."

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"It has to be secured to complete unification. The pension issue is a completely different matter."

A spokesman for the Saxony state government, like Thuringen run by the CDU, said "the two issues had absolutely nothing to do with each other."

Ten years after the reunification of west and east, billions of marks flow to the east funded by a national and unpopular levy on income, the so-called "solidarity tax."

But Schroeder did not say whether he expected the levy to be renewed after an agreement on it runs out in 2004.

"It depends on whether the states involved understand that when it comes to other issues -- such as pension reform -- everything is tied to everything else," he said.

Later he appeared to soften the remark with a reassurance that he understood that the east, with unemployment double that in the west, would need aid for a long time to come.

Schroeder wants cross-party support for what could be painful measures to overhaul the increasingly overburdened pension system -- his next big economic reform plan.

The CDU controls two out of the six east German states and is in coalition with Schroeder's Social Democrats in two more.

Schroeder was accused in July of "buying" leaders of the eastern states by promising grants in return for their support for his 50 billion marks ($23 billion) tax-cutting bill in the upper house, where the CDU has a blocking majority.

Copyright 2000 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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