Germany after elections

Now the Germans have sprung another big surprise on the world. Germany will have a lady Chancellor for the first time, Angela Merkel. Merkel has another first to her credit: she is the first Chancellor of unified Germany to hail from former communist-ruled East Germany.

Angela Merkel's Christian Democratic Union (CDU) won the September 18 Parliamentary elections in Germany by a very narrow margin. Along with its sister party Christian Social Union (CSU), it managed to get 226 seats in the 614-seat Bundestag, or Parliament, while Merkel's principal rival former Chancellor Gerhard Schroeder's Social Democratic Party (SPD) and their allies got 222 seats. It is necessary to obtain 308 seats to form a government.

This near dead-heat election forced the two major parties to negotiate a power sharing agreement to form what is known as "grand coalition". Merkel, after three weeks of intense negotiations, managed to get the support of the Social Democrats, but the latter did get their pound of flesh in the bargain. Chancellor Schroeder agreed to step down after seven years at the helm of the government; in return, Merkel had to agree to give an equal number of cabinet posts to Social Democrats, which included the prestigious posts of Foreign Minister and Finance Minister. Merkel and her allies kept defence, interior, education, agriculture, and economy portfolios.

Last Monday Chancellor-designate Merkel named a set of conservative ministers to her cabinet. They include some former ministers of Helmut Kohl's government, as well as some new-comers. She brought in Kohl's former Interior Minister Wolfgang Schaeuble in charge of the Ministry again. It may be recalled that Schaeuble had taken over the chairmanship of the CDU after Kohl's 1998 election defeat, but was subsequently replaced by Merkel in 2000 amid controversy arising out of party financing scandal involving Kohl.

The Defence portfolio was given to Franz Josef Jung, a close associate of Merkel's rival within the party, Hesse state governor Roland Koch. A former State education Minister Annette Schavan, who had led the efforts of some German states to bar Muslim teachers to wear the headgear, has been put in charge of the Education Ministry. The post of Economy was given to Edmund Stoiber, the chief of their ally CSU.

The crucial post of Merkel's Chief of Staff, a cabinet-level post, has been given to Thomas de Maiziere, at present the interior minister of the Saxony province. He is a cousin of former East Germany's first and only democratically elected leader Lothar de Maiziere. Merkel was Lothar's spokesperson in 1990.

On the other hand, Schroeder's social Democrats last week named their choices for eight ministers in the new government. They include Schroeder's Chief of Staff Frank Walter Steinmeier as Foreign Minister, and Peer Steinbrueck, a business-friendly former State Governor as Finance Minister. These nominations will be confirmed in formal talks between the two major parties, and after that Merkel would be formally proposed to Parliament for endorsement as Chancellor. It is not clear at this stage whether Schroeder would play any role in the new government.

The billion-dollar question is, will this grand coalition work? Traditionally, the two big parties, CDU and SPD, form stable governments in coalition with smaller parties. The previous grand coalition between these two major parties was during 1966-69, well before the German reunification. It had worked at that time as the communist threat was there; but this is an entirely new ball game. The two parties fought the election on two different platforms; and it is difficult to envisage these parties making compromises for a consensus course to run the country.

Merkel's "mission impossible" task is to evolve the consensus course. She expressed optimism that it would be possible to reach agreement on key foreign policy issues especially on the question of improving relations with Washington, which had been strained due to Schroeder's vocal opposition to the war in Iraq. Washington would have been happier if Merkel had been able to form government without the SPD's support. It remains to be seen how far the new Foreign Minister, who was Schroeder's Chief of Staff, would agree to the revision of SPD's policy in order to appease the Americans.

Turkey's membership of the European Union is another important foreign policy issue on which the two sides have clearly divergent views. Merkel had openly campaigned against Turkey's EU membership and she would like to pursue the option of "privileged partnership" for Turkey. On the other hand, in view of recent convening of EU membership talks with Turkey, Schroeder had told Ankara recently that "privileged partnership" was no longer an option. Merkel openly contradicted Schroeder's position, a signal of the deep strain between the two leaders on foreign policy issues.

Such strains are likely to be repeated within the grand coalition government. SPD encouraged by better-than-expected results at the elections is expected to take a tough line on coalition talks. They would like to maintain their high profile on foreign policy issues, while Merkel's CDU would like to go for significant revision of those policies.

However, the bigger challenge lies in the areas of economy. The election campaign was fought by both sides against the backdrop of persistent unemployment and sluggish economic growth. It was undoubtedly the bitterest campaign in post-war Germany. The main factor that caused Schroeder's defeat is the current 11.2 percent unemployment rate. This high unemployment has already sapped the buying power, and had slowed down the German economy.

Social democrats have vowed to protect the German welfare system against the Christian Democrats' more "free-market" agenda. Economists are concerned that, given this sharp policy division, the grand coalition government would be slow to push reform to overhaul the country's ailing labour market for making the German economy more competitive.

Given this policy division, it is apparent that the new Government's economic package would bear little resemblance to Merkel's campaign pledges. There is a broad agreement between the two parties to simplify Germany's complex income tax system and to remove the loopholes, but there was no agreement on Merkel's bold proposal to give tax breaks. Both sides also agreed to maintain the existing system whereby labour and employers negotiate nation-wide labour costs but they are agreeable to loosen the rules. Merkel's proposal was to give more leeway to employers and labour to opt out of those deals.

Incidentally, in order to deliver her campaign pledges, Merkel has to compete not only against her ideological rivals in the SPD but also against her natural allies. The CSU chief and incoming Economy Minister Edmund Stoiber's views on economic issues lean away from Merkel's free market pledges. Merkel has to handle him carefully as he is a political rival and an aspirant for her job.

As per existing arrangements, all coalition talks, composition of the cabinet, policies of the new government should be completed by November 12 before Merkel could be formally endorsed as the Chancellor. This is a tough starting point for her.

The German voters have clearly indicated that instead of going for quick fix, both the parties should carefully work out economic reform proposals. The German economy, Europe's largest, plugged with high unemployment, huge budget deficit and growing oil prices, is now estimated to grow only at about 1.2 percent. The tasks ahead for Merkel are formidable. Can she inspire a team spirit in her cabinet composed of ministers from opposing parties and camps to face the challenges collectively? Germany is one of Bangladesh's top leading trade partners and a major donor. These important developments, obviously, will have an impact on our economy.

Syed Muazzem Ali is a former Foreign Secretary