Schroeder Agrees to Head His Party

German Chancellor Gerhard Schroeder on Friday positioned himself to take control of the fractured Social Democratic Party and make a fresh start toward reforming Europe’s most important economy after four months of political infighting and indecision.

A day after the surprise resignation of Oskar Lafontaine, the finance minister and party chief, Schroeder accepted the nomination of his fellow Social Democrats to take the ideological reins.

If confirmed at a special party gathering in Bonn on April 12, the 54-year-old Schroeder will become only the second Social Democrat in Germany’s post-World War II history to simultaneously head both the government and the party. The late Willy Brandt held both offices from 1969 to 1974.

Schroeder also moved quickly to propose a successor to Lafontaine as finance minister, nominating Hesse Gov. Hans Eichel, who has coordinate finance policy among German states ruled by Social Democrats.

Lafontaine remained in seclusion for a second day since dispatching terse notes to say he was giving up all political offices, and Schroeder himself confirmed that he was getting no answer when telephoning the controversial leftist at his home in Saarbruecken, on the French border.

Germany’s DAX stock market surged more than 5% after Lafontaine’s resignation, and trading of Europe’s new common currency, the euro, was also up nearly a point to $1.098 from Thursday’s $1.089 close in Frankfurt. The later New York closing figure was $1.0915.

German industrial chieftains who had been angered by Lafontaine’s version of tax reform making its way through the parliament have greeted his departure with unrestrained glee, presuming that the plan to shift more tax burdens from wage earners to employers will be leaving with him.

“This clears the way for a new beginning,” Dieter Hundt, head of the German Employers’ Assn., told journalists.

However, Schroeder cautioned industrial leaders against such expectations.

“I assume the Federal Council will vote on the tax reform on March 19 as planned. It is no longer up for discussion,” Schroeder told a news conference, noting that parliament’s other chamber, the Federal Assembly, has already approved the package of $12 billion in personal income tax cuts.

Lafontaine’s philosophy for tackling Germany’s 11.6% unemployment--raising industry taxes to bankroll more state jobs--clashed with Schroeder’s campaign promises to create a more investor-friendly economy in Germany, where taxes are already among the highest in the world and labor protections extensive.

Twenty leading German companies last week threatened to move their operations outside the country unless the tax reform plan was redrafted.

Hundt said industry is prepared to work with Schroeder’s government to improve the employment situation but only if the current tax proposal is rescinded.

Schroeder defeated Helmut Kohl for the chancellory in a Sept. 27 election on the promise to cut unemployment by negotiating an “alliance for jobs” with unions and employers. But the talks never materialized because of policies pushed by Lafontaine and the environmentalist Greens who share power with the Social Democrats, casting Schroeder as ineffectual against the leftist forces in the leadership.