End of the Kohl era

The election of Social Democrat leader Gerhard Schroeder as Germany's Chancellor reflects a leftward shift in German politics and goes with the recent European trend of ascendance of socialist parties.

THOMAS ABRAHAM
in London

IN an election that marked the end of an era, Germans voted out Helmut Kohl, their Chancellor for the last 16 years, and elected Gerhard Schroeder of the Centre-Left Social Democratic Party (SPD) to guide them into the next century.

Kohl, 68, presided over two landmark events in modern German history - the reunification of East Germany and West Germany and the creation of a strong, vibrant European Union. These achievements kept Kohl and his conservative Christian Democrats (CDU) in power for a length of time unprecedented in post-Second World War Germany: only Otto von Bismarck, the famous Iron Chancellor, has served a longer stint in office.

CHRISTOF STACHE / AP
Chancellor-elect Gerhard Schroeder, with wife Doris Schroeder-Koef, addresses supporters in Bonn on September 27.

Ironically, however, it was the problems created by Kohl's achievements, particularly the reunification of Germany, that saw his departure from office.

The September 27 election was fought against the backdrop of post-War Germany's highest ever unemployment figures: four million people, or nearly 11 per cent of the workforce, are out of work. To a large extent this was the result of Kohl's failure to integrate successfully the two Germanys. In the areas that make up the former East Germany, unemployment stands at 17 per cent and standards of living are well below those in the erstwhile West Germany, so much so the easterners feel they are the poor relatives of those in the West.

When the Berlin Wall came down in 1990 and Kohl took the momentous decision to unify the two halves of the country that had been divided by the War, he assumed that it would be a relatively straightforward process. It was taken for granted that government money and private investment would flow into the East and allow it to catch up quickly with the West. But it did not work quite that way.

While the Government poured in an estimated 1,000 million Deutschemarks into the East over the last seven years to bring the infrastructure up to western standards, private investors were less than helpful. Rather than investing in the East and building modern factories, companies in the former West Germany bought up companies in the East and shut them down to avoid competition, throwing workers out of jobs. As Kohl himself pointed out, the big mistake he made was in assuming that West German businesses would show a sense of solidarity with those in the East, rather than running them out of business. The economic and political divisions between the East and the West have not been erased. As Kohl remarked recently, "We have drifted farther apart than I had expected."

FRITZ REISS / AP
Helmut Kohl, the first post-War German Chancellor to be voted out of office.

The economic weakness of the former East Germany contributed to the high unemployment the country as a whole faces. But the Government's ability to tackle unemployment has been hampered by Kohl's other big achievement, the building of the European Union and the introduction of the European single currency, the euro, that will come into effect next year. In the run-up to the switchover to the single currency, all E.U. member-countries have had to undertake tight budgetary and fiscal controls. This gave the Kohl Government little leeway to boost jobs through greater public investment.

THE election was closely fought. In the early stages of the campaign, opinion polls showed the opposition SPD under its newly elected, charismatic leader Schroeder comfortably ahead of Kohl and his CDU. But Kohl, a seasoned campaigner, closed the gap in the last weeks; with a large number of voters undecided, it was not clear until election day which way it would go.

Voters were given a choice: the SPD and its new leader promised social justice and Centre-Left policies. Schroeder is regarded as one of the new modernising leftists in the mould of British Prime Minister Tony Blair. But in fact, he is far more to Blair's Left. Blair has abandoned the traditional language of social democrats and is careful not to attack the wealthy, but Schroeder has held on to the Left's traditional support among the working class and the weaker members of society. "The power of this land," he said, "comes not from a few millionaires who take their money out of the country, but millions of working people. They are the ones who define the strength of this economy."

Kohl and the Christian Democrats fought on the Chancellor's record in office, his position as the elder statesman of Europe, and the promise of an economic upturn. Kohl promised reforms of the welfare and pension system that market economists have said are necessary to restore German competitiveness, but gave few details about how this was to be done. Kohl also warned voters that the SPD, and the Green party, with which it is expected to form a "Red-Green coalition", would threaten jobs, destroy the economy and reduce Germany's standing in the world.

CHRISTOF STACHE / AP
Joschka Fischer, one of the leaders of the Green party which will be a constituent of a "Red-Green coalition".

When the results came in, it was clear that Germany had chosen the promise of change over that of continuity. Schroeder's SPD won over 40 per cent of the vote, and the Christian Democrats 35.1 per cent. This was the CDU's poorest showing in 40 years. This may seem to be a comfortable victory, but given Germany's system of proportional representation, it was not enough to give the SPD a majority in Parliament. The Green party, which won about 6.7 per cent of the vote, is likely to be the junior partner in the government. Negotiation between the two parties are in full swing, and Schroeder has promised to form a government by the end of October.

THE election results reflect a leftward shift in German politics and are in keeping with the political trend in Europe: 13 of the 15 European Union countries are now governed by Left or Centre-Left parties. The presence of the Greens in government will be reflected in the formulation of environment-friendly energy policies and a strong anti-nuclear position.

Schroeder also has pro-business credentials. As Prime Minister of the German State of Lower Saxony, he followed pro-business policies; he is also on the board of directors of the German automobile company Volkswagen. But Schroeder is also committed to maintaining Germany's impressive welfare system and the German model of social partnerships among the government, trade unions and businesses.

The new Chancellor is certain to come under pressure from the financial markets to dismantle the welfare state and reduce workers' rights on the grounds that these are necessary to make German businesses more competitive and to reduce unemployment. There will also be pressure to reduce government spending, which makes up 49.7 per cent of gross national product, far higher than what free market enthusiasts would wish to see. Wages in Germany are among the highest in the world and have been blamed for the high unemployment rate. There will be calls on the Government to make it easier for companies to lay off workers - or make the labour market "more flexible", as it is euphemistically described. Despite these problems, however, Germany is still an economic superpower. It is Europe's largest economy, and the world's third largest after the United States and Japan.

The German economic model, which transformed the country from a war-torn, poverty-stricken nation into an economic giant on the basis of social partnership and a strong welfare state - the so-called Rhineland model of capitalism - is much derided in today's world, where the dominant model is that of lightly regulated U.S.-style capitalism, with its minimal welfare programme and few rights for workers. But despite the "disadvantages" of Germany's high wages and social costs, companies like Daimler-Benz are world beaters. Daimler Benz's takeover of the U.S. automobile manufacturer Chrysler this year demonstrates the strengths that German companies have. One of Schroeder's main challenges will be to preserve the German economic model and demonstrate that it is a viable alternative to U.S.-style capitalism.

DIETHER ENDLICHER / AP
Jubilant supporters of the Social Democratic Party at the SPD headquarters in Bonn on September 27.

The emergence of a new government in Germany was keenly watched with interest abroad. Significantly, a day after the results were announced, Schroeder flew to Paris to meet French President Jacques Chirac and Prime Minister Lionel Jospin. The Franco-German axis has been the motor of the European Union, and both countries have worked closely together to ensure the success of the single currency. The visit was intended to ensure that this partnership would not change with the change in government in Germany. Schroeder's election will also facilitate closer relations with Britain. Schroeder and Blair get on well, and this could help draw Britain deeper into Europe.

The change of government is also important for the global economy. After Schroeder's visit to Paris, there are indications that Germany will back French proposals for greater regulation of global capital flows to bring stability to the world economy. France has until now been isolated among the major powers in asking for greater regulation. The U.S. and the International Monetary Fund have opposed any move to place curbs on capital movements. But with Germany joining France, a distinctively European voice on global economic issues could emerge.

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