Schroeder's election call puts German reforms in firing line

Marc Young

A resounding electoral defeat for German Chancellor Gerhard Schroeder's Social Democrats in a key state election may have just brought Europe's largest country one step closer to its very own Margaret Thatcher.

On Sunday, voters in Germany's most populous state North Rhine-Westphalia (NRW) tossed out the Social Democratic Party (SPD) after nearly 40 years in office. Long considered the party's most important regional stronghold, the poll caused a political earthquake as Mr Schroeder proposed a snap general election for this autumn.

With Germany for years hobbled by chronically high unemployment and weak growth, Mr Schroeder has pursued an unpopular course of welfare cuts and labour market reforms in an attempt to get the world's third-largest economy back on track. Although most Germans realise their country is in dire need of an overhaul, voters have still punished the SPD in a string of state elections leading up to the NRW poll.

'The bitter election result for my party in North Rhine-Westphalia has brought into question the political foundation for continuing our work,' Mr Schroeder said in a terse televised address announcing his intention to end his second term a year early. 'To be able to proceed with the reforms that I consider necessary, I believe the clear support of a majority of Germans is required.'

Although the chancellor still has a majority in the lower house of parliament, the conservative opposition now dominates the upper house, which is made up of Germany's federal states.

With left-wing members of his own party keen to roll back his reforms, the centrist Mr Schroeder apparently decided he would no longer be able to govern effectively at a time when a record number of Germans are out of work and the economy is flagging.

'Germany is in the middle of a deep process of change,' he said. 'It will take time for the reforms to have a positive effect on the standard of living for all in our country. But more than anything, these policies need the support of its citizens.'

Mr Schroeder's intention to pursue early federal elections caught the leader of the conservatives, Angela Merkel, off guard. But with her Christian Democrats riding high in national opinion polls, she quickly backed the idea.

'It would be good for the country,' she said. 'We need to get things done.'

Buoyed by the victory of the centre-right grouping of her Christian Democratic Union (CDU) and the smaller market-oriented Free Democrats in NRW, Ms Merkel is the leading candidate to challenge Mr Schroeder for the chancellorship. Often portrayed as a Teutonic version of former British prime minister Lady Thatcher, she would be both the first woman and first person from the former communist east to lead Germany.

If elected, she would likely guide Berlin's foreign policy in a distinctly more transatlantic direction founded on closer ties with the US.

Although pro-European Union, she is sceptical of further expanding the bloc and opposed to Turkey's membership bid. She would also almost certainly take a more radical approach to Germany's economic woes.

'Red-Green no longer has the strength to shape the future,' Ms Merkel said, referring to the colours of Mr Schoeder's centre-left coalition of Social Democrats and environmentalist Greens. 'Socially-oriented policies are those that create jobs.'

Plagued by soaring joblessness and daunting structural challenges in the industrial Ruhr Valley, North Rhine-Westphalia was the last German state with a similar red-green government. Its demise does not bode well for Mr Schroeder and his popular Greens Foreign Minister, Joschka Fischer, and many observers saw the NRW contest as an important bellwether for the upcoming general election.

But few expected Mr Schroeder would propose bringing the federal vote - scheduled for autumn next year - forward by a year if the SPD lost.

'I'm extremely surprised. I would have thought they'd wait until 2006 to get their feet again,' said Juergen Falter, a professor of political science at the University of Mainz. 'But you can understand why they did it. They realise how desperate the situation is at the federal level.'

By taking the initiative and going on the offensive, Mr Schroeder is throwing down the gauntlet to his own party as much as the conservative opposition. Ever since he embarked on his reform course, he has been dogged by the leftist wing of the SPD, which accuses him of gutting Germany's generous welfare state.

Cantankerous trade unions, traditionally a core SPD constituency, aggravated the situation last year by backing massive public protests to labour market measures that had already been made law. Some rebel Social Democrats have even flirted with an upstart left-wing party that drained support from the SPD in the North Rhine-Westphalia election.

In the run-up to the election, SPD chairman Franz Muentefering tried to placate left-wingers by railing against globalisation with anti-capitalism rhetoric. He attacked the 'growing power of capital' and the total 'commoditisation' of a society focused on short-term profit and gain.

Mr Muentefering also compared some international - mostly American - financial investors to 'swarms of locusts' that descend upon and destroy everything they touch, before moving on to their next victim.

At a time when 12 per cent of Germans are unemployed and large firms are eagerly moving jobs to Germany's low-wage neighbours, the comments found considerable resonance throughout the country.

'The election is going to spark a new phase of internal party discussion in the SPD about where it's heading,' Uwe Andersen, a political expert at the University of Bochum, told the South China Morning Post.

He said Mr Schroeder could still win the next election. However, the SPD will have difficulty mobilising its core supporters, while remaining attractive to swing voters.

Realising he has no room to manoeuvre, Mr Schroeder appears genuinely committed to his government's reform course and willing to risk his political future on it. But in the coming campaign he will surely attempt to position himself as the candidate committed to saving Germany's popular, if untenable, welfare system.

And he will certainly try to paint Ms Merkel as a potential 'Iron Lady Chancellor', with Lady Thatcher's reputation for ruthlessly hacking away at Britain's social safety net.

Ms Merkel, on the other hand, on Sunday had already begun deriding Mr Schroeder's SPD as a paralysed party which was on the verge of implosion.

'They had no other choice than to go for new elections,' she said. 'They can't hold their shop together. It shows just how bankrupt the Social Democrats are.'