Wednesday, November 02, 2005

German Politics

German Politics: 2005 Elections and their Significance

Facts about Germany
Population 82.4m (No Growth -UK,57.8)
15-64…… 67%
65+………19%
Ethnic Groups
German….. 91%
Turks………2,4%
Other………6.1%
Life Expectancy
Men…….... 75: 7
Women….. 82
Territory
356.959 sq km (UK, 244.103- Germany Slightly smaller than Montana) Unified in 1990 to incorporate former communist Eastern Germany (GDR).

Boundaries with: Austria, Belgium, Czech, Denmark, France, Poland, Luxembourg, Netherlands, Switzerland. (n.b. boundaries with France and Poland- 450 km)

Government Apparatus
cabinet: Cabinet or Bundes-minister (Federal Ministers) appointed by the president on the recommendation of the chancellor
elections: president elected for a five-year term by a Federal Convention including all members of the Federal Assembly and an equal number of delegates elected by the state parliaments; chancellor elected by an absolute majority of the Federal Assembly for a four-year term.
cabinet: Cabinet or Bundes-minister (Federal Ministers) appointed by the president on the recommendation of the chancellor

Unemployment 11 per cent

State form: Federation of 16 Lander each with own constitution, legislature and government.

Govt Chancellor- the federal ‘Prime Minister’- is elected by an absolute majority of the Bundestag and appoints a Cabinet of some 20 ministers. The President formally appoints both Chancellor and ministers. The federal govt is responsible to the Bundestag.
The Bundesrat or second chamber is made up of representatives of the Lander; each sends 3-6 members depending on the size of the state; they can only vote en bloc. The Bundesrat can veto legislation in certain circumstances.

Voting System: Additional Member System (AMS), whereby each voter has two votes: one for half of the seats elected by simple majority and half according to a regional list system. It’s the percentage won in ‘party’ vote which determines the eventual entitlement of seats for each party though they must either win 5 per cent of the vote to qualify or three constituency seats. Constituency seats are ‘topped -up’ to entitlement levels by regional list seats. The system is quite complex and, interestingly, only a minority of voters realise the ‘party’ vote plays the decisive role it does.

Need for reform of system. When it was set up by the occupying powers in 1949, the German system was praised for its success in maintaining peace and winning prosperity. However the system is no longer held up as ideal. The process whereby the rich Lander subsidize the poorer ones has become unpopular and some suggest it would be easier for states to be self supporting if they were larger; e.g. 7 instead of 16. Associated with this reform would be the proposal to give the states more powers to raise local revenue, thus freeing them from their dependence on the federal govt for funding- though Eastern Germany will need help for years to come. The Bundesrat tend to block measures passed by the lower house producing log-jams. Worse, the voting system tends to produce finely balanced results requiring coalitions. This dilutes necessary reforms which are then often blocked anyway by the Bundesrat.

‘The constitution, and the federal political system as it has evolved also places considerable checks on the Chancellor.-far more than any British Prime Minister. Ironically, a political system with its elaborate checks and balances, designed to prevent the emergence of another Adolf Hitler, is now helping to prevent the emergence of necessary reforms.’
Timothy Garton Ash, Guardian 13th October, 2005

Government 1982- 1998: Centre- Right Coalition led by Helmut Kohl of the CDU. This coalition with the FDP won four elections in a row and Kohl was keen to make it five and become the longest serving Chancellor since Bismarck. In 1994 the SDP led in the polls but the CDU/CSU came up from behind and on 16th October won enough seats-294 from 41.5 per cent- to form a coalition with the FDP-47 from 6.9 per cent- again; the SDP won 252 from 36.4 per cent.
Unification. In 1989 when the Berlin Wall came down Kohl played his master stroke and initiated unification. Mitterand was against it and so was Thatcher, passionately suspicious of the Germans at the best of times. However Kohl had already bought off Mrs Thatcher’s importunate demands for the return of ‘our’ money from the Community and had ‘fixed’ Bush six months earlier on a boat cruise in the Rhine in May 1989. Here the president had accepted the need for ‘a Germany whole and free and in a Europe whole and free’. Kohl also fixed Gorbachev some weeks later. When the Wall came down, Kohl joined Mitterand in pushing for the integrative conference which became Maastricht. At the same time he offered the Frenchman the vision of the single currency which the two countries would co-manage, an enmeshment designed to allay his fears of an over-mighty Deutschmark. ‘A single currency and the political and foreign policy constaints of a European Union were the Mitterand’s price for a unified Germany.’ (Ian Traynor and Martin Walker, Guardian, 25/9/98). Some German politicians were opposed to unification but the public were initially delighted to see their vast state in a single unit again. However it cost the federal government £100bn a year to finance the new eastern province and the influx of East Germans to the west caused much bitterness. German interest rates had to stay high to finance the outflow of money to the east and this caused troubles all over Europe, not least to Kohl’s fellow Conservative government in Britain when ERM membership foundered and sowed the seeds of political downfall for Major.

Single Currency: It was Kohl who drove this project and insisted it go forward when others were less confident of its success. France too was behind it but without Kohl it would not have happened and would not be due to come initially into operation in January 1999 and fully so in 2002. This is another example of Kohl’s vision of a united Europe in which prosperity is entrenched and violent conflict abolished.

East Germany
The source of Kohl’s greatest achievement also proved to be his greatest bugbear. With some 20 per cent of the voters it virtually decided the election. In 1990 they voted gratefully for the man who included them in the German family and promised them ‘blooming economic landscapes’; they probably saved him from defeat. In 1994 they voted less enthusiastically for him but he still got back in. However in 1998 the two parties were so level the key was again in the east where the voters are less experienced in democracy and consequently easier to influence. Here unemployment- over 4 million overall- had been concentrated and neo Nazi activity, with skin-headed thugs, most vigorous.

Economy: Traditionally this has been the biggest and strongest in Europe but over the past two decades Germany’s economy has lost its glitter. Perhaps for too long it has suffered from excessively high levels of tax, social security and wages.

i)Whilst the average manufacturing worker earn 18.80 euros an hour in the USA, in Germany he or she earns $27.60 euros: a differential which inevitably worked through and denied markets to German goods, however good they might be (and quality is still very high). The new Central and east European economies the wage rate is only 5 euros an hour.

ii) The structure of German industrial relations is cumbersome with agreements laboriously reached with unions which provide unrivalled employment protection but which erode competitiveness. German businessmen have long expressed admiration for the British supply side reforms and the flexible labour markets which have helped the British economy become more competitive.

iii) While the economy has not ceased to expand, it has been at a much at a much slower rate than before-maybe 1% per year or a little above. GDP in 2004 was $2.4 trillion compared with $1.7 trillion for UK. This translates to $28.7K GDP per head compared with $29.6K per head for UK. It seems hard to believe but we are marginally more prosperous than the mighty Germans! Germans have enjoyed the fat of the land since they recovered from the grinding poverty, the razed cities which followed their defeat in the war: some solace perhaps, this material comfort for international contempt they had to suffer and to some extent still do.

iv) Placing the problem in its wider context, the German economy has had to survive five huge shocks to its health:
a) globalisation
b) EU and its enlargement, including the appearance of economies on the scene with much lower wage rates.
c) Introduction of euro and need to keep interest rates low.
d) Opening up of central and eastern Europe- see b) above.
e) German re-unification- this has entailed huge annual transfer payments to the east and still continues with the east having unemployment of 20%.
That it has survived rather well, is a sign of its fundamental robustness.

v) Domestic demand: is lagging behind and suffocating economic growth. Germans are rich yet do not feel so and tend to save and not spend. Some of the problem is that interest rates are set for the whole of the euro-zone and are designed to keep inflation at bay. Lower rates would stimulate demand and help the German economy expand. The stability and growth pact in any case prevents euro-zone members from borrowing to spend their way back into expansion.

German Economic Recovery?

On 20th August The Economist’s main leading article was on the chances of German economic recovery.
i) Hartz IV: this was a restructuring of unemployment programme, designed by a businessman to encourage/goad/force more workers back into employment, especially the 1.8 million who were classified as ‘long-term unemployed’. Whilst criticized by some, this has created anew atmosphere in the labour market discouraging excessive wage demands.
ii) Self –employed numbers are on the increase: another sign of vigour in the economy.
iii) Many big companies- Siemens, Daimler Chrysler, VW and many others have cut deals with workforces –lengthening the working week, limiting perks and controlling wages- to ensure a future in the globalized world economy.
iv) Explosion of part-time workers- now 30% of total- makes it easier for employers to control both numbers and costs.
v) Relative unit costs of German goods has been going down very successfully: 12 percentage points since 1999 compared to an increase of 8 for France and Italy (who now face serious economic problems). This has helped German exports to recover and hit new heights in 2004.
vi) Business and Higher Education has set up sector schemes to innovate and over the long term these should pay dividends.
vii) The Berlin Institute for Population and Development has called for more babies from the post 1960 cohort of women to produce workers to help pay their pensions in a few decades time. [In 1960 births were 1.3m; in 2004 700,000.]

Political Dramatis Personae

Social Democrats: Schroeder.
It was 18 years since the last socialist administration in Germany; like Britain there were only two earlier ones since the war. Also like British experience and the leaders of the SDP were desperate to unseat the mighty ‘elephant’ as Kohl was known. Their answer was to choose a politician not unlike Tony Blair, Gerhard Schroeder. Unlike Blair however, he was born into crushing poverty in 1944, the son of a Wehrmacht conscript killed at the end of the war and a cleaner. He left school at 14 to sell crockery and achieved his ‘arbitur’ at night school and then studied law at Gottingen. His political life was almost exclusively in Lower Saxony in the north of the country.
In 1981, a young socialist lawyer he made his maiden speech in the Bundestag causing the old guard to explode with apoplexy: he was not wearing a tie. He always seemed temperamentally against the establishment, once rattling the gates to the Chancellor’s residence in a drunken prank shouting ‘I want to be in there.’ He proved persuasive however on the television and soon rivalled the party leaders for popularity. But he made enemies in his own party which he compared to a cowshed (‘smells a bit as you come close, but once you’re inside, it’s nice and warm.’). Some say his fatherless family background encouraged unstable emotions: he has married four times, the last time to journalist, 19 years his junior. On policy he has been as vague as any New Labour luminary and on unemployment talked airily of ‘training’ and a ‘new alliance of workers and employers.’ The keywords of his campaign were ‘New Centre’, ‘modernisation’ ‘social justice’ and ‘innovation’. His seven year period in power has seen Germany’s economy become frail and, whilst voters wanted it to revive, they were not prepared to pay the price asked in terms of reform. With 11% unemployment and a budget deficit of 60 billion euros Schroeder’s record looked unimpressive as he led his party into the campaign last August. His ‘Agenda 2010’ programme of reform was a brave attempt to solve problems long diagnosed in the German economy but his left of centre party found it hard to swallow them and this led the Chancellor to bring forward the election by a year in a desperate attempt to win a popular mandate to overrule his own party.

Oskar Lafontaine.
This was Schroeder’s number two, aged 62, some say once the real power behind the plausible yet vacuous Chancellor. He was the party’s candidate in 1990 and led it to its lowest share of the vote-33.5 per cent- since 1957. Like Schroeder he upset the party hierarchy once dismissing Helmut Schmidt’s call for staunchness and duty as ‘secondary qualities’ useful, perhaps for ‘running concentration camps’ In 1990 a crazed woman slashed him deeply with a knife during a rally but he recovered with his ambition intact. Intellectually he is sharper-educated (by Jesuits) - and masters detail with ease. But he was not as popular with the voters and, perhaps a little like Gordon Brown, stood aside for the apparent ‘winner’. However, like Brown too he harboured ambitions for the top job and could not forgive Schroeder his success. Installed as his deputy, Oscar was never happy and resigned after a mere six months, thereupon becoming a baleful and some said, malevolent critic of the SPD administration. He began to criticise the Chancellor for ‘rightwing policies’ and eventually left to lead a new grouping on the (once Marxist) left, known as the New Left. His ‘treachery’ must have hurt Schroeder keenly as they now do not speak to each other.

Joschka Fischer: Greens
56 year old self educated butcher’s son and former taxi driver is one of the country’s most popular politicians. He led the small party which made Schroeder’s rule possible. He is the acceptable face of the Greens, the party many feel they ought to support but are repelled by demands they change their life style in a way they cannot conceive of doing. For example the Greens at one stage proposed to triple petrol prices, limit on the frequency of air holiday travel, halve the number of soldiers in the army and dissolve NATO. From being one of Germany’s fattest public figures-though not in the Kohl class- he lost weight, gave up alcohol and took up marathon running. He set out to reform the Greens and make them more focussed and effective with a national rather than a decentralised regional structure. He served for many years as foreign minister to Schroeder before(apparently) resigning from politics quite recently .

Angela Merkel-CDU
Merkel is soon to be confirmed as Chancellor: Germany’s first female political chief executive. Aged 51 and born in Eastern Germany she is a product of the communist German system. Her parents were a pastor and a teacher in a small town close to Berlin. She studied physics at Leipzig University where she earned a doctorate and then worked in quantum chemistry. She was involved in the democracy movement in 1989 and when her new party merged with the CDU in 1990 her youth and ability caught the eye of Kohl who made her a minister for the environment and then for women. Her training in disguising her true feelings- as part of a communist system- has stood her in good stead. She first married a physicist, Ulrich Merkel but they divorced in 1982 and she remarried chemistry professor, Joachim Sauer in 1998.
When Kohl was involved in scandal in 1999, she was the first to criticise him publicly and, far from attracting opprobrium, was made chair of the CDU- a surprise for a Protestant woman in a Catholic party. This might have been one of the reasons she did not get on with Edmund Stoiber, the Bavarian CSU leader who also had ambitions to be Chancellor. But then his challenge faded in 2002 Merkel became leader of the opposition in lower house, the Bundestag. Merkel favours extensive reform of the unions and the welfare state to make Germany’s economy stronger. According to The Economist she intends to strengthen the right of firms to negotiate company level wage deals and to weaken employment protection laws which make it so difficult to dismiss employees. She also aims to simplify the staggeringly complex income tax system as well as reform the funding of the health service- excellent but hindered by insufficient funding. So, while the SPD’s reform programme was faltering through lack of political support, Merkel was advocating a much tougher set of reforms which she insisted are essential to put Germany back on the road to economic success. Merkel supports a strong bond with USA and favoured the Iraq war; some called her a lackey of the USA as a result. She is also against the admission of Turkey into the EU and advises a much looser connection. For a woman from Eastern Germany to have made it to the top in a mere 15 years is a breathtaking achievement.

The Campaign for the 2005 Election
In May 2005 she won the candidacy of the CDU for president in the next election, due in 2006. Schroeder called an election a year early- for September 2005- to outflank opposition in his own party to reform measures, not dissimilar to those favoured by Merkel. She began the campaign with a 21% poll lead but she is not a strong campaigner and her stock plummeted after she confused ‘net’ with ‘gross’ income in an interview on TV. Part of her response was to appoint Paul Kirchhof as economic adviser who had some interesting ideas. Unfortunately he had too many ideas and one of them- a flat tax- was ridiculed by Schroeder in a televised debate as a ruse to fill the pockets of them rich; most viewers thought she had lost the debate. From being way out in front Merkel’s campaign began to wobble. Schroeder toured the country making inspirational speeches- attacking the CDU intention to impose the ‘Anglo-Saxon free market model’ and rallying his supporters; twice before he had come from behind to win so the CDU could have been forgiven for being nervous as their supremacy began to look threadbare. Merkel came under intense fire within her own party for allowing a huge and decisive lead to evaporate.

The Results
The gap began to close so that by polling day the 21 point lead had been reduced to a mere couple of points. Merkel was criticised in her own party for being lack lustre on the stump and her prospects looked bleak for a while. On the day it was agonisingly close with CDU/CSU garnering 35% and SDP 34%.This meant that the governing coalition of SPD-Greens had lost its majority, while the challenging CDU-Free Democrat one had not achieved one of its own. The free market Free Democrats polled 10%, the Greens and the New Left Party 8.1 and 8.7 respectively. In Bavaria the right do so badly- Stoiber had unwisely criticised voters in East Germany- that the unthinkable happened: it failed to make 50% of the vote.

Seats Won
SDP….222
Greens.51
New Left..54
CDU….225
FDP….61

Merkel announced she was the winner but Schroeder maintained he was still Chancellor. Behind the scenes both parties sought to find coalition partners. The Free Democrats and the Greens did not have enough seats to help either side and neither would do business with the New Left. For two to three weeks rumours abounded regarding possible alliances involving unlikely coalitions, all of them named by the symbolism of the party colours involved e.g. the ‘Jamaica Coalition’ when the proposal involved the colours of the flag of that country(CDU (black,) FDP (yellow), and green). When the CDU finally won a delayed result in Dresden the moral advantage seemed to pass to Merkel who had been stubbornly resisting Schroeder’s insistence that he should remain as Chancellor, even if the eventual outcome was a ‘Grand Coalition’ between the two big parties. After three weeks of unrelenting negotiation the SPD leader relented and agreed Merkel should be Chancellor. The price- heavy for the CDU was that 8 of the 14 Cabinet ‘policy portfolios’ would be held by the SPD, suggesting that Schroeder’s senior party colleagues, in the final analysis put their own careers before his. The SDP have been allocated finance, foreign affairs and justice while the CDU-CSU has to be content with economics, defence and interior- all lower pecking order jobs.
Merkel has also had to make policy concessions as a four page memo of the negotiations makes clear. The tax system is to be simplified but the exemption from tax for night and holiday shifts will remain. Company level wage negotiations moreover, will not be mandated by legislation to take place on a sector wide basis as the CDU had planned. The final date for cabinet names and coalition details to be finalised is 12th November and a week after that probably then formal election of Merkel as Chancellor will take place. The nationwide parties on both sides will have to first approve the deal struck and this might prove difficult as while the SPD thinks Schroeder’s reform package is too extreme, the CDU-CSU think Merkel is having to sacrifice the very principles on which she fought, and narrowly won, the election. Both leaders face internal opponents and the infighting could both delay Merkel’s final confirmation as Chancellor and- the bane of all such coalitions- frustrate the reforms which Germany so desperately needs. SPD party congresses can be tumultuous. In 1968, when it met to vote on Germany’s first grand coalition, the chairman of the party’s parliamentary party ended up with two teeth missing. Already the youth sections of the CDU have demanded, and won, an inquiry into the electoral debacle over which Merkel presided. Few expect the coalition to survive longer than six months – though some estimate two years. Germany’s embryonic economic recovery could prove to be the most important casualty of such a failure. The Economist concludes that if the attempted coupling of the two major parties fails:

‘The immediate result would probably be new elections- and in the longer term, a loss of confidence in the country’s main political players, apparently incapable of getting their act together, even when the entire nation is urging them on.’(20/10/05).

Bill Jones, November 2nd, 2005.

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