Merkel's challenge


Angela Merkel, Germany's first female chancellor and head of its Christian Democrats (CDU), is negotiating a policy agenda with her partners in a new government formed after national elections last month, the Social Democrats (SPD).

The talks are proving a tough slog. But they should be finished by mid-November, when the two parties' agreed agenda will be announced and the parliament can confirm her as head of government, succeeding the SPD's Gerhard Schroeder.

At first glance, Ms. Merkel's position doesn't look strong: During last summer's campaign, she squandered a huge lead, with her party and its Bavarian sister, the Christian Socials (CSU), finishing up less than a percentage point ahead of Mr. Schroeder's SPD. Unable to form a parliamentary majority with any other party, she was compelled to join in a so-called grand coalition. Her CDU-SPD government will include several political heavyweights with vastly more political experience than she, some of them political rivals whose loyalty to her is questionable.

Domestic economic issues - especially unemployment, now at 11.7 percent - dominated the election campaign. Ms. Merkel's focus as chancellor will be on reforming and stimulating a stagnant German economy, Europe's biggest.

Even though foreign policy played no part in the election, the Bush administration is delighted to see Ms. Merkel as chancellor. And not just because President Bush has a liking for strong women in influential government positions.

Almost alone among German politicians, she backed the Iraq war. That took courage, because voters continue to be overwhelmingly against it. In her campaign rhetoric, she stressed "freedom" and what for Germany are free-market recipes for economic problems.

With Ms. Merkel, prospects for an improvement in relations with the United States are good, and that is likely to be reflected in the coalition's policy agenda. Her CDU has traditionally been much more pro-American than its partner has.

Not that Ms. Merkel will be sending troops to Iraq. Germany will, however, likely step up its training of Iraqi security forces and be more willing to make more soldiers available for peacekeeping missions outside Europe.

The primary U.S. interest in Germany, however, is to see its economy revive. Can Ms. Merkel, constrained as she is within her coalition, deliver on this? Her chances are good because of her proven talents and because of the politics of her coalition.

Ms. Merkel's rise to the pinnacle of power is truly astonishing. Not only is she the first woman in German history to make it to the political top, she is also an East German, and nobody from the once-communist east has wielded significant political power nationally since unification 15 years ago. She has made it by dogged determination, careful analysis and great patience. She has moved at precisely the right moment to exploit the weaknesses of her male rivals, who have consistently underestimated her.

Her coalition is powerful enough to put through whatever reforms it can settle upon. It represents a fat majority in parliament (448 seats in a Bundestag of 597), so it can tolerate a few defectors and still get its bills through. Her party controls the upper house, whose approval is needed for most important legislation.

Key will be the performance of the Cabinet's two super heavyweights: Finance Minister Edmund Stoiber, head of the Bavarian CSU, and Labor Minister Franz MM-|ntefering, head of the SPD, who work well together. Germany's political system is so constructed as to compel consensus, and the CDU and SPD have long cooperated quietly behind the scenes. The last grand coalition between them (1966 to 1969) functioned well.

The reform agenda this time will be incremental, not radical. Agreement can be reached on cuts in corporate taxes and non-wage costs, subsidy reduction, health care cost containment, clearer delineation of central and state powers in Germany's complicated federalist structure and - hardest but most important - more flexibility in the labor market through probably modest loosening of job protection.

Germany's economic fundamentals are strong. Its big corporations are highly profitable. Both large and small businesses have restructured drastically in recent years to meet the challenges of globalization. It is the world's biggest exporter, well ahead of the United States.

Crucial is changing public attitudes. For over a decade, Germans have had the need for reform drummed into their ears. By now they have come to accept it. So Ms. Merkel will be able to extend the cautious reforms begun by Mr. Schroeder three years ago. Some are taking hold already, and she will capitalize and benefit politically from that trend.

Ms. Merkel's analytical earnestness is better suited than Mr. Schroeder's flashy ebullience to dealing with the complexity of Germany's economic problems. Neither she nor her chances of success should be underestimated.

Robert Gerald Livingston, a senior visiting fellow at the German Historical Institute in Washington, was director of the American Institute for Contemporary German Studies at the Johns Hopkins University. His e-mail address is

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