German Alternatives

Now, everything is on the table. The election programs have been presented. The President has given his OK. Everyone is awaiting the formal go-ahead for the federal elections in Germany September 18

Elections are always decided on election day - never before. At this time before the September 2002 elections the opposition lead by CDU/CSU was clearly in the lead in the opinion polls. But then events in combination with the tactical skills of Gerhard Schröder intervened, and the red-green coalition, by the thinnest of margins, managed to survive.

Then it was the sudden discussion concerning a possible war in Iraq and the flooding disasters in Eastern Germany that suddenly changed the scenery. The opposition challenger Edmund Stoiber lost the election during the last two weeks of the campaign, and he essentially lost in among the voters of Eastern Germany.

Now, prospects for the opposition looks more solid. But there are problems on the horizon.

What happened during the years since 2002 is that the red-green coalition in Berlin suddenly was forced to see the necessity of structural reforms in the economy, launced the so called Agenda 2010 but then gradually started to lose the support of their own party machineries and voters. Their past rhetoric clashed with the reality of governance, and the result was a de facto collapse of the consensus needed for succesful governance.

When Chancellor Schröder laid out the arguments for dissolving the Bundestag in a remarkable statesmans-like address on July 1st, this was effectively what he said. He did not hide the painful poolitical reality of his situation.

Since then, attention has been focused mainly on the government program presented by the CDU/CSU, but also on the emergence of new political forces to the left of the SPD and the Greens.

Angela Merkel has been firm in wanting to present an honest program that can be governed on after the election. It has obviously taken some arms-twisting within the CEDU/CSU to do so, but as a side-effect her reputation as a determined boss has been reinforced.

She has come out with a program that aims at boosting the economy and furthering by taking down wage taxes by two percentage points, thus further increasing the competitiveness of German industry, lowering income taxes with the highest bracket going down from 42 to 39 % as well as proceeding with plans to take down corporate taxes to 19 %. All of this should be financed by an increase in VAT from 16 to 18 %.

And to this should of course be added other measures. Labour market regulations will be further liberalized, among other things.

This program has, of course, lead to a major debate on the wisdom of increasing VAT, and of announcing the intention ahead of the election. SPD is saying that with the CDU everything will be more expensive but nothing will be better. FDP is not happy with the VAT increase, saying that more expenditures should be cut.

But economist and business leaders that are grudging over the VAT increase are still giving their nod of approval to a program that does attack some of the structural weaknesses of the German economy.

I agree. In fact I believe that Germany is already on its way towards boosting its competitiveness. But this would give this development further impertus. This should provide more jobs down the line as well.

And so far it does not seem as if the VAT proposal has hurt the standing of CDU/CSU in the opinion polls.

As the SPD has started to work with Agenda 2010, its leftist wing has become increasingly frustrated. And now a new phenomenon has emerged with the alliance between the old leader of the SPD and former finance minister Oscar Lafontaine and Gregor Gysi of the old PDS successor to the East German communist party.

With a message of heavy leftist populism, although with an element of nationalism and resistance to immigration, this new group has now climed to 12 % in the opinion polls. In East Germany, it today looks like the single strongest political force.

This is primarily a very difficult challenge for the SPD, and so far they have not managed to find a strategy to counter this new leftist development. The debate on what to do is accelerating.

But it's also a problem for the ambitions of Angela Merkel. The latest opinion polls give the combination of CDU/CSU and liberal FDP 49 %, while a combination of SPD, the Greens and the new leftist populist gets 48 %. A slight shift to the left and Germany risks entering a most difficult situation.

What then? A grand coalition between the CDU/CDU and the SPD? Not impossible, but any mention of that possibility exposes the left flank of the SPD even more than it already is, and accordingly we are likely to hear everyone saying that it will not happen. But an impossible situation might require impossible answers.

We'll see. The hoped-for coalition between the CDU/CSU and FDP is certainly very possible on present trends, indeed the most likely outcome. But there is room for drama and surprises in the weeks ahead.

We'll stay tuned.