Social Democrats and Greens approve pact aimed at job-creation

A special conference of Germany's Social Democrats yesterday approved a coalition pact with the Greens, opening the way for Mr Gerhard Schroder to be elected chancellor tomorrow. The Greens approved the deal at a conference in Bonn on Saturday.

Only one Social Democrat delegate out of more than 500 present voted against the coalition deal, which Mr Schroder promised would herald a new age in German politics.

"The new government stands for innovation and justice. We are going to give Germany a new beginning, first in Bonn, then in Berlin," he said.

Mr Schroder made a brief visit to the summit of EU leaders in the Austrian town of Portschach on Saturday, the first such meeting in 16 years to take place without the presence of the outgoing German Chancellor, Dr Helmut Kohl.

Mr Schroder said Europe was waiting for Germany to offer a lead in the fight against unemployment and in the shaping of an EU that was closer to citizens. "The Europe we want is not only a place for economic competition but also a social and cultural community," he said.

Germany's European policy is set to be dominated by the new Finance Minister, Mr Oskar Lafontaine, who is also the Social Democrats' party chairman. The German media is predicting a power struggle between Mr Lafontaine and Mr Schroder and business leaders complain that the new coalition's programme for government bears Mr Lafontaine's stamp.

Both men sought to play down their differences yesterday, insisting that they would work closely together for the next four years.

"The Schroder government can succeed only if the chancellor and party chairman work together and do not allow themselves to be divided by anybody," Mr Lafontaine said.

Caricatured by conservatives as an old-fashioned left-winger, Mr Lafontaine is in fact a forward-looking economic thinker who is not afraid to challenge the financial and industrial establishment.

He repeated his call yesterday for the Bundesbank and the new European Central Bank to use monetary policy to encourage growth and job creation rather than focus exclusively on keeping down inflation.

The new government promises a radical programme of economic, social and environmental renewal for Germany that will shift Europe's most powerful nation sharply to the left. Every economic policy will be judged on whether it will help to reduce unemployment and Germany wants the EU to put the fight against unemployment at the top of its agenda.

Tax reform will reduce the burden on low and middle income families by about £1,000 a year but the very rich will pay more as many tax write-offs are swept away.

Germany's citizenship law will be changed to allow millions of foreigners to become German citizens and the government will introduce the country's first anti-discrimination law.

All nuclear power stations will be shut down, gradually but irreversibly, and "green taxes" on petrol, electricity and gas will reward the environmentally responsible and punish polluters.

Equal opportunities legislation will be binding on public and private employers and girls will be allocated half of all training places in industry. Gay couples will be allowed to register their partnerships and enjoy some of the rights of those who are married.