The German grand
coalition has come to a standstill
Chancellor Merkel under pressure
Added on October 7, 2006
On October 5, 2006 after a night-session, Chancellor
Merkel, the Bavarian CSU leader Stoiber and the SPD heavyweight Beck reached
a compromise in the health care financing debate. De facto, the real reform
has been postponed at least until 2009, when new general elections will be
held. The present compromise does not offer more competition and more free
market elements. Instead, it cements the role of the state, which means even
higher health care costs in the future.
Article added on October 1, 2006
As many observers have predicted,
the German Grand coalition has ended in a standstill. The government formed
by the Christian Democratic Union (CDU/CSU) and the Social Democratic Party
(SPD) has not yet produced any substantial reform.
In its annual listing of the world's most powerful women, Forbes
ranked the German Chancellor Angela Merkel at the top stop. However,
currently, the world's most powerful woman is under pressure from the voters
in surveys, from the media in articles and, most importantly, from
colleagues and rivals within her own party.
The latest attacks on Merkel came in the context of the health reform. In a
confidential meeting at the famous wellness and gourmet Hotel Traube Tonbach
in the Black Forest, the Minister President of the state of
Baden-Württemberg, Günther Oettinger (CDU), said that it was Merkel's
mistake to create great expectations within the public regarding a
comprehensive health reform, expectations that could never be fulfilled. At
best, there will be a few small reform projects which will have to be
revised again in a few years. Oettinger predicted that the grand coalition
would surely hold until 2007, when Germany will assume the Presidency of the
Council of the European Union and host the G8-Summit, "where a lot of photos
will be produced". But it won't relativize the domestic problems. "This
simply won't work", he added according to the German weekly Der Spiegel.
Another Minister President, Jürgen Rüttgers (CDU) from the state of North
Rhine-Westphalia, went further in today's edition of the Frankfurter
Allgemeine Sonntagszeitung. He put into question the entire health
reform. According to him, it lacks a clear direction. Furthermore, he
insisted that the CDU has to define its core values.
The former Minister President from the state of Baden-Württemberg asked for
a fundamental rethinking of the health reform. He pointed out that it is not
enough to change a few details here and there, but that a substantial
recommencement of the reform was needed.
Chancellor Merkel is under pressure not only because of the ill-conceived
health reform, but also because the CDU/CSU has broken and/or forgotten many
of its electoral promises. The program implemented so far looks more like
the one championed by the SPD. Before the elections, the CDU/CSU together
with the economically liberal FDP opposed a rise of the VAT, but after the
2005 federal election the grand coalition adopted a 3% increase which may
well bring the German economic growth to a halt.
Furthermore, some have not forgotten that Merkel actually lost the last
general election, giving away a comfortable lead in the opinion polls in the
last months and weeks of the electoral campaign by making poor choices and
being unable to counter Chancellor Schröder's populist attacks and false
In May and June of 2005, some polls went as far as to give the CDU/CSU an
absolute majority. In any case, a win of the CDU/CSU together with the FDP
seemed certain. Merkel then introduced the jurist and tax law expert Paul
Kirchhof as potential Minister of Treasury. The professor championed a flat
tax which scared away many Germans, although the CDU/CSU officially adopted
a "lighter" version with three income tax rates in its electoral program.
The populist Schröder depicted the end of the "social market-economy" (soziale
Marktwirtschaft), which many Germans falsely interpret as a form of
welfare state in which the state takes care of all individuals from birth to
death. In reality, its originators, including the famous Minister of Economy
(and later less successful Chancellor) Ludwig Erhard, had meant that the
free market economy itself is the best source of welfare, enabling the
citizens to take care of themselves. The German form of Ordoliberalism
champions a strong state which fights cartels and subsidies. However,
already in the 1950s and 1960s, the successful model - responsible for the
post-war economic miracle in Germany - was diluted.
Before the 2005 election, Merkel, large parts of the CDU/CSU as well as the
FDP wanted to strengthen the market economy, to return to the recipes of
Ordoliberalism. Unfortunately, too many voters seemed unready for these
kind of reforms. Instead of championing necessary adaptations to global
challenges, the grand coalition largely opted for a standstill.
Since she rose to the post of party chairman
in 2000, Angela Merkel was considered a
champion of economic liberalism who pushes for economic and other reforms in
Germany. However, she remained a pragmatic politician whose stands in
factual issues remain too often blurred. This allows her to appear as a
mediator within the grand coalition, her party and on the international
level, but from a Chancellor many expect sharper decision-making qualities.
In 2000, Merkel was considered more a sympathy carrier than a leader. Since then, she has risen
from the post of Party Chairman to the one of Chancellor. At first viewed as
an outsider who managed to rise to power thanks to particular circumstances,
she has become a leader with an important power base. In this regard, she
seems to have learned a lot from her former mentor, Chancellor Kohl.
However, if Schröder had not attacked her in the evening directly after the
elections claiming the leadership in Germany for himself and therefore
forcing Merkel's CDU rivals to rally behind her, she might have lost her
After the 2005 election, a majority of the German voters saw the grand
coalition and Chancellor Merkel as the best possible solution. One year and
many disappointments later, a majority has realized that the grand coalition
as it presents itself right now is unable to lead Germany into a prosperous
future. Courageous reforms are still needed. Merkel's rivals have realized
this too and some seem ready to succeed her. However, nobody wants to throw
in his (only male rivals in sight) hat right now.
In 2007, as President of the Council of the European Union and host of the
G8-Summit, Chancellor Merkel may hope to change the course and impose a
reform agenda. If she misses this chance, historians will consider her days
as Chancellor a waste of time.
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