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 allegations.

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 power.

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.

Today's deals at Amazon.com.