Germany

William Drozdiak, president of the American Council on Germany, says the new chancellor of Germany, Angela Merkel, sees her January 13 meeting at the White House with President Bush as a chance “to get things off to a good start” in relations between Germany and the United States that had been quite frosty under the preceding German government.Even though she is likely to suggest that the Guantanamo Bay detention center be closed, Drozdiak says, “I think she’s much more sympathetic to a lot of [the president’s] positions.”“She’s one of the few German politicians who actually supported the American incursion into Iraq, and although it’s not conceivable that Germany will offer to send troops, the coalition government will probably step up training of Iraqi forces and, I think, do whatever is possible to help extricate American forces from Iraq. “A former foreign editor for the Washington Post, Drozdiak says “the key subject” in the talks may well be “how to influence President [Vladimir] Putin, who now has the presidency of the G8 [Group of Eight] for this year, giving Russia more of a role to play in global discussions than in the past.”Drozdiak was interviewed by Bernard Gwertzman, consulting editor for cfr.org, onJanuary 9, 2006.For the sake of this interview let’s start out by imagining you’re President Bush and you’re going to see Germany’s new chancellor, Angela Merkel, at the White House on Friday. What do you expect to hear from her?I think from the standpoint of President Bush he’s looking to develop a much friendlier relationship and professional rapport with Gerhard Schroeder’s successor than he had with Schroeder. As you know, by the end of Schroeder’s term he and Bush were hardly on speaking terms. It’s difficult for the Western alliance when the leader of the most powerful and influential country in Europe is not speaking with the American president. Now, under Chancellor Merkel I think there’s the opportunity for a whole new relationship. She has already expressed her desire to get things off to a good start with the president, and I think she’s much more sympathetic to a lot of his positions. She’s one of the few German politicians who actually supported the American incursion into Iraq, and although it’s not conceivable that Germany will offer to send troops, the coalition government will probably step up training of Iraqi forces, and I think do whatever is possible to help extricate American forces from Iraq. The second thing they’ll probably offer to do that will please President Bush is to continue and possibly even increase their role in Afghanistan. Germany has already made the greatest NATO contribution to Afghanistan after the United States. And she’ll also want to spend time talking about President [Vladimir] Putin [of Russia] and the future energy strategy for the West. I think all of this will be well received by President Bush. I think he himself is predisposed to like her. I’ve been told by friends of the president that he has said on occasion that her personal background, having grown up in a communist dictatorship [East Germany], probably means that she appreciates freedom more than most of us.That’s interesting. Now, she gave an interview over the weekend in which she indicated she would like to see the U.S. prison camp in Guantanamo Bay closed. This is in connection I guess with a Turkish-German who’s a prisoner there, right?Yes, a German citizen of Turkish descent named Murat Kurnaz who was wrongly imprisoned there. She will present the view, as she’d mentioned in the Spiegel interview, that it would be best in American interests to close down Guantanamo Bay because she’s concerned with the rising tide of anti-Americanism in Europe and in Germany today and indeed in other parts of the world. She believes that it would best improve America’s image by shutting down a place that is associated in the minds of many people with human rights violations. She will weigh in on what is already a debate in the United States, and she’s obviously aware that there are many people in theUnited Stateswho have also urged the president to do the same.You mentioned public opinion in Germany. I take it polls still show an anti-American attitude?Well, I think the phenomenon that we see today is, first of all, the new generation has grown up fifteen, sixteen years after the fall of the Berlin Wall that does not feel any immediate sense of gratitude toward the United States for its security. And indeed, many Germans, younger Germans today, may feel and indeed express this according to some opinion polls, that the greatest security threat to Germany is being dragged into some misbegotten adventure, whether it be in Iraq, Iran, or somewhere else in theMiddle Eastby their entangled commitments with the Unites States. And so at a time when Germany sits at the geographic heart of an expanding European Union, where it really is at peace with all nine of its neighbors, no longer threatened by an invasion of Russian or Soviet troops, Germans want to enjoy this phase of peace. They are troubled by the overseas or global entanglements that may result from their relations with the United States.Merkel is in charge of a coalition government with the former ruling party the Social Democrats. Has this affected her ability to rule?So far she’s off to something of a honeymoon with German voters. Opinion polls show she’s doing extremely well, and she performed admirably in her first encounter with European leaders; she was the one who was crucial to brokering a compromise over a very difficult budget debate back in December at her first, really big foreign-policy challenge she faced. In that way, she proved she is dedicated to the cause of European unity and making peace within the European Union with the other leaders. Now the next big test is to improve the relationship with the United States. It’s going to be difficult because of the nature of her coalition. This is only the second time in post-war history when the two biggest parties in Germany have been forced to get together. What this basically amounts to is a special and perhaps only temporary kind of governing coalition in order to deal with the enormous economic and social challenges faced byGermanytoday. But that was the outcome of the votes in September and after many difficult weeks of negotiations they reached agreement that she would head up this government which will be faced with many domestic challenges.The domestic challenges included high unemployment and problems with spending, right?Germany’s running a big deficit. Under the terms of being a member of the Euro club, you have to keep your deficits under 3 percent, and Germany has broken that now for several years running; it has to find a way – if it could raise taxes too much that would cause a further depressing effect on the economy—and she has to try to find a way to put people back to work so that they will be less of a drain on the generous social welfare entitlements in Germany and also create a new sense of hope and inspiration in the people. I think she’s done that pretty well so far; she’s given a couple of speeches in the Bundestag that have been very well-received. What’s unique about her is that apart from being the first female leader in recent German history, she also comes from the east. But she’s also representative of the new generation, she and the new leader of the Social Democratic Party, Matias Platzekm are both from Eastern Germany, and in a way this augers well for the effort to reconcile the two halves of Germany, which has been a very difficult process over the past sixteen years since the Berlin Wall fell. People still refer to “the wall in people’s minds,” that seems to divide the east and the west.Just a side issue, she doesn’t speak English, does she?She speaks some English, and it’s improving. I’ve had lunch with her and she’s quite charming, very quick-witted; she’s got a very sharp intelligence, and she has benefited from the fact that she’s been constantly underestimated by her political foes. The fact that she has survived and thrived indeed within the Christian Democratic Party, which is notorious for its bitter feuding, suggests there’s a lot more Machiavellian quality to her political abilities than people have credited her in the past.Now in recent weeks the biggest story in Europe, of course, has been Russia’s effort to pressure Ukraine into paying a much higher fee for its natural gas and the impact that had on Europe when it tried to reduce the delivery. Has this been a major problem in German-Russian relations?Well, I think this is a case where Germany can play really a key role. And I think this will be perhaps the key subject of discussions with President Bush: How to influence President Putin, who now has the presidency of the G8 for this year, giving Russia more of a role to play in global discussions than in the past. Merkel will leave Washington and go later this month toRussiafor talks with Putin. What Germany is looking for are stable and secure gas supplies. Under Schroeder, her predecessor,Germany negotiated an agreement to bring Russian gas under the Baltic Sea directly to Germany. This has infuriated Poland and the Balkan states, so Merkel will be tested by having to improve the relationship with Putin at the same time as repairing relations with her Eastern neighbors. And I think that this is all part of an effort by Germany and Europe to wean themselves away from supplies of oil and gas from the Middle East, a region of notorious volatility. There has also been a hope that Russia would be integrated more with the West and become a safe and secure supplier. However, this recent crisis with Ukraine has called into question Russia’s reliability. In many respects, I think this was a bad move by Putin because it damaged any confidence that Germany and other European states have in Russia’s promises to provide safe and secure supplies of oil and gas.Just a footnote here, how has this affected the reaction in Germanyto Schroeder’s becoming president of this new European and Russian pipeline?This is a consortium that was set up under the Russian consortium, Gazprom, to build a pipeline. It will dole out about $5 billion or so in contracts. And when Schroeder was named chairman of the board of this consortium, it provoked an uproar in Germany because it became clear he had negotiated these arrangements with Putin while still in office. And many people believed this constituted a serious conflict of interest. I think under European rules, if he had been a member of the European Commission or member of the European Parliament he would have been forced to wait at least one year before he could take such a position. But as it is, it has badly hurt his reputation in Germany and I think any chance or any thoughts he may have had about an eventual political comeback will be badly eroded by taking this job.Is Merkel going to have a chance to meet with members of Congress while she’s in Washington?Yes, I understand she’s going to have breakfast with several leaders of Congress, from both parties, and I think that it’s primarily a get-acquainted session, and she wants to make herself known to leaders on the Hill. This is a chance for her to meet with the president and become comfortable in their relationship. I think they’re going to meet for an hour or two in the morning and then have lunch together. This would be after the breakfast with the members of congress.

Fritz Stern, a leading historian on Germany, says the coming to power in Germany of a so-called Grand Coalition between the rival Christian Democratic Union (CDU) and Social Democratic Party (SPD), is a major achievement and that there is great significance in the fact that the new chancellor, Angela Merkel, and the head of the Social Democrats, Matthias Platzeck, are both from former East Germany."You will probably sense a basic view on my part of optimism, of hope about this coalition that was very difficult to put together," says Stern, university professor emeritus at Columbia University. "I was thinking how difficult it would be if Republicans and Democrats in this country were to try to form a genuine bipartisan government or even a bipartisan policy at this point. I think one ought to appreciate that there is a considerable political achievement in the fact that the two parties have overcome their difficulties, that there’s actually a kind of collegial atmosphere in anticipation of a joint government."Stern was interviewed by Bernard Gwertzman, consulting editor for cfr.org, on November 21, 2005.Tomorrow, Germany’s parliament—the Bundestag—will formally elect the new chancellor, Angela Merkel, who is the leader of the Christian Democratic Union (CDU), who will head a "Grand Coalition" government with the rival Social Democratic Party (SPD). Is there a special significance in this besides the fact that she’s the first woman chancellor in German history? Yes, I think there certainly is greater significance. I think it’s immensely significant that she’s not only the first woman but she’s the first easterner, the first person from what used to be the German Democratic Republic to head the united Germany. I think politically and psychologically that it is important and much to be welcomed.Why is that? I am well aware that there are obviously different views of the success of unification in 1990. I know that many East Germans felt they had been taken over by the West Germans, had been treated as second-class citizens, and had not been properly respected by them. On the other hand, West Germans felt, "What more do these people want? We invest so heavily in them." You had this real disparity between the two parts. There was more than lingering resentment in the East. I’m not saying that she is representative of most of the old East Germans or that the fact she is now chancellor is going to dispel the resentment, but it is going to make a difference. I think it is interesting that the new Social Democrat chairman is also from the East, Matthias Platzeck.I know both of them. I actually know him better than I know her. Again his selection is a major plus. It is something unpredictable. It was part of something that unfolded in history unexpectedly. A complicated election led, ultimately, to a change of generations in both parties, particularly in the Social Democratic Party. I think Platzeck might have emerged as a Social Democratic leader four years from now, but no one counted on this happening now, and he was elected by an overwhelming majority by the party. All of that speaks well at least to the question of relations between East and West. Is there going to be resentment in the West to the top party leaders coming from the East? I think no more than there has already been under the surface because of the cost of unification. The transfer of money from West to East is still extraordinary. I can’t give it to you in percentage of GNP [gross national product] but it is a significant amount. It has helped to modernize the transportation and communication systems, but it has not produced a real change for the large majority of East German citizens. Hence, you still have a migration of East Germans to West Germany where unemployment is lower and wages are higher and so on. On the other hand, you have a counter-demographic movement of West to East. I don’t think the resentment increases; the contributions will have to continue. Some West Germans might even wake up to the fact [and say], "Wait a minute, there was a great deal of talent there," as emerged in the glorious days of 1989-90, when the East Germans organized themselves into groups that modeled themselves after what was going on in Poland, later in Hungary, and so on.What are the main issues this new government has to deal with? Are they primarily economic?Yes, primarily economic. I think it has to be said that [outgoing SPD Chancellor Gerhard] Schroeder did make a brave beginning with his plan, called Agenda 2010. He was beginning to make reforms which above all hurt his standing in his own party; making demands which globalization had imposed on Germany to make them competitive. I have to mention the Germans have a capacity for self pity, for self worry that can hardly be surpassed. German exports continued to be greater than those of other European nations and the economy was doing better in many ways than the mood of people or public opinion would indicate.Was this gloomy mood because there was high unemployment?High unemployment is obviously a key issue as well as outsourcing of jobs to other nations. Nevertheless, all I’m trying to say is that there are certain parts of the economy, such as the export economy, that continues to do actually very well. The reforms Schroeder began were aimed at making the German industry more competitive and, I think, cutbacks on certain welfare programs, plans, and benefits. It was without question a courageous start that this new coalition government will have to continue. It will continue along the lines he set out and they will raise the value added tax, they’ve already announced that. There are certain things, obviously in the short to medium term, which a coalition government can do more easily. They already announced that starting next year the Christmas bonuses of civil servants are going to be reduced. Either party doing it alone or in a coalition with a smaller party, would have found that kind of gesture—when Germans have an excessively high number of civil servants—very difficult. Doing it together as an economy measure is simply a signal of what they mean to do. Then they have the whole problem of the budget deficit, which exceeds European Union regulations. They have to bring that budget deficit into order and this kind of measure is simply a signal of where they want to go. Have you ever met Ms. Merkel?Yes, I’ve met her.What is she like?When she came here [New York] she was already the leader of the opposition party and I think expressed her own pro-American, or as I would prefer to say, pro-Bush stance relatively clearly to a small group of people. She was an impressive and very self contained lady when I met her two or three years ago in a small circle. She wasn’t outgoing. She would intellectually answer questions but she wouldn’t volunteer, as some politicians do, her views. Then of course she ran a not very successful campaign this year. My hunch is, when you think of her whole life of growing up in the German Democratic Republic, the daughter of a pastor, she must be capable of learning, of picking up things to an amazing extent. She grew up in that kind of dictatorial state where the fashion was intellectual uniformity. And then as soon as unification came, she learned to adapt herself to what you might loosely call a Western way of life, particularly in politics. To me this suggests great adaptability and I think the Merkel of tomorrow when she becomes chancellor is going to be significantly different from the Merkel of the beginning of the political campaign. I’m saying this on the basis of what I picked up on as part of her persona, which is the capability for growing and learning.There’s an expectation in the United States that relations between Germany and the United States will improve when she takes office because they were quite strained starting in 2002 with Schroeder, right?Yes, I think as far as atmospherics go, that is correct. It also has to do with Merkel’s view about socioeconomic issues. I think she had a much greater temptation to look at the Anglo-American capitalism or Reagan-ized capitalism we have in this country today. She had a penchant for it, a temptation to think that’s the way to go. I think she has learned in the campaign that certainly a majority of voting Germans don’t want that and she’d be willing to adapt herself to that. Yes, the atmospherics would improve. I doubt very much a coalition government would make any strategic changes in Germany’s foreign policy. By that, I mean her cabinet is not going to reverse the course Schroeder set on Iraq. Her travel itinerary is not uninteresting. As far as I understand it, her travel schedule is already set. She is going to go to Paris, Brussels, London, and Warsaw in that order. And eventually she’ll come to Washington?Yes, absolutely.It is interesting she’s going the conventional European route, Paris first.She’s going to have a difficult time knitting the personal relationships because she doesn’t know these people yet. But again, anyone who’s done as well as she has at home—partly by nerve and willingness to be venturesome and confrontational as need be—will be guided by what the French call, "the logic of facts." I think she will do well in setting relations with the French—that will be primary. She also wants to strengthen relations with Britain. And then she will face—what one must notice in passing that has nothing to do with her, or the German situation—a changed Polish situation: Polish-German relations today, because of the new elections in Poland, are less promising or less tension-free than they were a few months ago. Why is that? I’m speculating that the remarks made by Lech Kaczynski, the new president of Poland, which included such comments as, "We still have claims against the Germans," may be troublesome. Now, nobody questions that during the German occupation of Poland the atrocities were beyond belief. You could almost say beyond reparations. By raising the issue sixty years later, this could awaken feelings among Germans—second- and third-generation expellees [from former German territories, now part of Poland—who would say, "Wait a minute the Poles are going to make claims on us?" I thought all of that was settled by treaty years ago? The frontiers were settled. The issue of reparations was raised during the electoral campaign in Poland. In other words, what I would call confidently, that the era of magnificent attempts at reconciliation between Germans and Poles that began in the late 80’s and lasted through the 90’s has darkened and things have become more complicated. She of course has no truck with Russia. She’s campaigned against Schroeder’s close ties with [President Vladimir] Putin. Again I think there are certain constraints. She will have to get on with him, if for no other reason than economic and economic ties are very strong and growing stronger. And Russia supplies Germany, I guess, with most of its energy.Absolutely. And that has been something the Unites States has been concerned about since the 1980’s. What do you feel in general about the coalition?You will probably sense a basic view on my part of optimism, of hope about this coalition that was very difficult to put together. I was thinking how difficult it would be if Republicans and Democrats in this country were to try to form a genuine bipartisan government or even a bipartisan policy at this point. I think one ought to appreciate that there is a considerable political achievement in the fact that the two parties have overcome their difficulties, that there’s actually a kind of collegial atmosphere in anticipation of a joint government. And I want to say a couple of things about two cabinet members in particular—the foreign minister Frank-Walter Steinmeier, whom I barely know because he has operated in a discreet and almost invisible way, as a confidante of Schroeder. He certainly knows the ins and outs of German foreign policy—where the troubles lie, where one has to pay particular attention, and so on. He knows all that. I think he will be a source of stability and strength to her. The chancellor does have great latitude in power even in setting foreign policy. In a coalition government, she would be careful and the advice she would get from Steinmeier would be one of continuity. Secondly, I want to say that the fact that Wolfgang Schauble is going to be minister of the interior is an excellent choice. He is one of the sharpest, most intelligent, most broad-thinking politicians in the Christian Democratic Union (CDU) and a person I like to describe as a genuine conservative, by which I mean a conservative with old-fashioned conservative principles and a kind of liberal fundament. That’s a key position, given the whole question of antiterrorism and so on. I think one can be very pleased by that appointment. I singled it out because he is a remarkable person and will add strength, and because she and he had a falling out. She treated him coolly on the question of electing the president of the federal republic—an office he wanted, an office he would have been very good at—and the way she cold-shouldered him and pushed him aside about a year ago didn’t suggest they would get on with each other. The fact that he has this key position is something that I think is a very good sign. My first reaction to Schroeder’s decision to step down and ask for new elections was uneasiness. I thought it was very close to being contrary to the spirit of the constitution. In retrospect, I think he not only served his own departure well, he engineered to leave in a remarkable way. He served the party well by the help he gave in the electoral campaign. He managed to leave the party in better shape than one could have anticipated. It seems to me quite plausible that his place in history will be more kindly judged than likely thought a year ago or six months ago.

William M. Drozdiak, president of the American Council on Germany, says the emerging “grand coalition” government to be headed by Angela Merkel of the conservative Christian Democratic Union must face “enormous” challenges, but because of the major economic crises in that country, “the grand coalition, in a way, is a government of national emergency that many Germans want to succeed.” He says that while Merkel will probably ease tensions with the United States, there is unlikely to be any major shift in foreign policy, such as sending sending of German troops to Iraq. Merkel will probably cool relations with Russia, whose leader, President Vladimir Putin, had been quite close with her predecessor, Chancellor Gerhard Schroeder. The thrust of her policies, however, will have to focus on collaborating with her Social Democratic Party partners in finding ways to restore Germany’s economic power, Drozdiak says. He was interviewed by Bernard Gwertzman, consulting editor for cfr.org, on October 11, 2005. Several weeks have gone by since the parliamentary elections ended in a virtual stalemate with the Social Democratic Party’s (SPD) Gerhard Schroeder and the Christian Democratic Union’s (CDU) Angela Merkel each claiming they should be the chancellor. Now a deal has been struck: Angela Merkel will be the first woman chancellor in German history but the SPD will get eight of the fourteen cabinet posts in this grand coalition. What does this say about the ability of Germany to move forward? The challenges are enormous, but the fact that this will be a “grand coalition” with a solid majority in both houses of parliament suggests that if [the CDU and SPD] do cooperate and find the right degree of compromise, they can achieve quite a bit. The fact that both parties are natural rivals will stand in the way, but there is recognition in both parties that, in a sense, they are doomed to succeed because the alternatives are so much worse. One risk is that [this coalition government] will strengthen the extremist tendencies in German politics, which is something no one wants to see. Secondly, the fact that Germany, as the world’s third-biggest economy and the biggest in Europe, must absolutely return to a path of growth in order to reduce the high level of unemployment, and also to get Europe back to contributing to the world economy. To that extent, the grand coalition in a way is a government of national emergency that many Germans want to succeed. The latest poll suggests that about 54 percent of all Germans see this as the best possible hope of getting Germany out of its political and economic stalemate. Just review again the degree of economic problems the Germans are having. Because of the high labor costs, a lot of jobs have been outsourced, going overseas, or moving to lower-wage countries such as Poland or Slovakia, where a lot of the automobile manufacturing jobs are now moving. Among all Western countries, Germany has the lowest proportion of working people to the total population. The latest figures show about 26 million out of a total population of 82 million have full-time jobs. That means one person is supporting three people in the population. And given the generous social welfare benefits, this simply can’t be sustained. Secondly, the force of globalization means that in order to attract investments for the future, Germany is going to have to have a more flexible labor market. This will be the biggest challenge for the Social Democrats—whose party is rooted in the working class—whether they can find acceptable compromises with Merkel’s Christian Democrats, who entered the election campaign on a platform of radical reforms of the labor market. But of course, the Social Democrats have been making some economic reforms of their own while they were in power, and I guess that contributed to Schroeder’s defeat, right? Well, it put him at odds with important factions in his own party. It caused the alienation of a lot of the left-wing of the Social Democrats. In fact, it provoked his party nemesis, Oskar Lafontaine to leave the party and start up a party of his own called the Democratic Left, which along with the former Communists got over 8 percent of the vote and that contributed to the defeat of the Social Democrats. But the fact that Schroeder started these painful reforms provides a certain degree of momentum. Both parties now realize this should be the starting point of where the new government needs to go. To that extent there’s a certain degree of consensus. I see from the German press that, as part of the coalition deal, the CDU will control the economy, interior, defense, agriculture, education, and family portfolios and the SPD will have foreign affairs, the finance ministry, labor, justice, as well as health development and cooperation, transport, and environment. Will that give the CDU enough leverage to work out meaningful reforms or are they going to be stalemated on these issues? Well, in a way the onus of responsibility will lie with the Social Democrats because they are going to have eight out of the fourteen ministries, which means they will have to carry much of the burden of these reforms in the eyes of the public. So to that extent, while the political pundits are saying Merkel gave up a lot and some people in her party say she gave up too much in order to get control of the chancellery, in a way this could be a clever tactic on her part in order to get greater cooperation from the SPD. The SPD will have, as you say, control of the finance, labor, and health ministries. In all three of those, that’s where reforms are vitally needed. So if you can bring the Social Democrats along on these reforms, given the fact that the grand coalition has strong majorities in both houses of parliament, this in a way could make achievement of some of these reforms slightly easier. What kind of a chancellor is Merkel apt to be? She was regarded as an apathetic campaigner and that contributed to the small majority she finally ended up with. Is the public really interested in backing her? I think given the changes in the political system, she’s going to find her policymaking rule extremely limited. In a way, the barons in the two big parties will be able to set the tone for the policies that will be pursued by this government. However, as we saw under Chancellor Schroeder, the chancellor’s position has greater leeway in terms of affecting public opinion, and also, curiously, greater control over foreign policy than ever before. It’s interesting how the last couple of years Schroeder managed to diminish the role played by Joschka Fischer, the foreign minister from the Green Party, despite his popularity. I think Merkel will also try to put her stamp on foreign policy given the fact that her hands may be tied on domestic policy. Talking about foreign affairs, I always thought it interesting that in Germany the leading coalition partner gets the foreign ministry slot, not the winner. You would think the chancellor would want to run his or her own foreign policy but it has to do it through a coalition partner. Who’s likely to be the foreign minister? It hasn’t been formally decided yet. But I’ve heard, in talking with people within the SPD in the last day or two, that Peter Struck is the leading candidate. He was the former defense minister and he could move over to the foreign ministry. How does he get along with people in Washington, for instance? He was initially received with a great degree of skepticism. However, he has performed quite well as defense minister. He has expanded Germany’s role in Afghanistan to a surprising degree. Germany now has the largest contingent of foreign forces outside the United States there. He’s been quite supportive in Afghanistan despite German refusal to send any troops to Iraq. The country has been quite supportive of fighting the war on terror in Afghanistan. He was also quite critical of Spain’s decision to pull troops out of Iraq after the Social Democrats took over the government there, and he said that was very destabilizing. So that suggests that he’s got a more pragmatic view about foreign policy. But as I said, what will be interesting to see is how he will coexist with Merkel. I think she will make some significant changes in foreign policy given her own different attitudes from those of Schroeder. I think we’re likely to see her take a more skeptical view toward Vladimir Putin, the president of Russia, who had struck up a close friendship with Schroeder. In fact, they had recently concluded a pipeline that will bring greater oil supplies to Germany. This has antagonized some of Germany’s neighbors, notably Poland. I think Merkel will try to improve the relationship with Poland and distance herself from Russia. She’ll also try to bring about a more friendly tone or relationship with the United States. I think she differs with Schroeder over the question of lifting the arms embargo against China. Schroeder was very much in favor of doing so and Merkel, I believe, will be opposed to it. And lastly, I think she’s more inclined to strike up a tactical alliance with [British Prime Minister] Tony Blair rather than with [French President] Jacques Chirac. In terms of European Union [EU] policy or getting the EU back on track, I think she’s likely to align herself with Blair in trying to push through some reforms on how the EU structures its budget and its farm spending. One issue that looms with the United States is over Turkey. She’s opposed to Turkey’s entry into the European Union, right? That’s right. But I don’t think that will be a major issue. The negotiations between the EU and Turkey began on October 3. Most people estimate that it will take at least ten or twelve years to resolve. I think this obviously is well beyond the life span of a Merkel government. In contrast to Schroeder, who supported Turkey’s membership in the EU, she has said she only wants a privileged partnership. I think she’s likely to soft-pedal on that issue and I don’t think it’s going to be a major impediment to relations with the United States, at least at this stage. I guess we can expect an early visit by her to Washington, right? I think she’ll want to do that, following visits with a couple of her EU partners, perhaps France, Poland, or Britain at the outset. But she will definitely want to make an early visit to Washington to demonstrate her eagerness to improve the relationship. By all accounts, she has had some very friendly talks already with President Bush in a get-acquainted sort of way. Does she have a foreign policy brain trust? Yes, I would think that one of the leading advisers to her in this regard as an elder statesman of the party is Wolfgang Schauble, who made a trip to Washington a few weeks ago in which he met with [Secretary of State] Condoleezza Rice and also with the president, briefly, to reassure them about the outlines of a CDU foreign policy under Merkel. I think he’s likely to continue playing an effective role as sort of a conciliator between Berlin and Washington. Do we know who’s likely to be her defense minister from CDU? Within the CDU, actually Schauble could be a candidate for that. But I think, again, regardless of who is named, I don’t think that will cause any real change in Germany’s defense posture. I think there’s no question that Germany will not be sending troops to Iraq. But I think they will extend and continue to play a fairly effective role in Afghanistan—more than other European allies. The key post, I guess, is the finance minister. Is that the same as the economic minister? Well, the economic minister will be Edmund Stoiber, who is head of the Christian Social Union, the Bavarian sister party of the CDU. He, as the minister president or governor of Bavaria, has had a very successful economic record. The area around Munich is one of the most economically vibrant parts of Germany, particularly when it comes to industry and technology. So he’s been appointed to try and replicate that kind of success on a nation-wide kind of scale. The Finance Ministry will be in the hands of the Social Democrats. That Finance Ministry will lead the way to any reform in the tax system, which many people think needs to be overhauled at this state. But that’s going to be very tough to accomplish, given the differences over that issue, right? Yes. While everybody agrees that [the tax system] has to be reformed, there is no single view on how that should be done. Merkel got into trouble in the campaign when she brought on board an adviser who advocated a flat tax. Schroeder attacked her for that. Why is this so important? Both parties realized that they will be held accountable if they don’t succeed and that their failure could feed these extremist tendencies. And I think this is one of the key factors that will push them to try and succeed.

Charles A. Kupchan, the Council’s director of European Studies, says the current political impasse in Germany between the Social Democrats and the Christian Democrats over who should head the next government represents the European Union’s “most significant political crisis since its inception.” “The stalemate we see in Germany today is in some respects a microcosm of the bigger debate across Europe on whether to hunker down and protect the traditional welfare state and traditional nation-state, with its largely Christian character,” says Kupchan, a professor of international relations at Georgetown University. Kupchan foresees growing problems with Turkey, which he says is unlikely to gain admission to the European Union (EU) in the near future. Kupchan was interviewed by Bernard Gwertzman, consulting editor for cfr.org, on September 28, 2005. Nearly two weeks after the parliamentary elections in Germany, the two major parties remain divided over who should be the next chancellor and which parties should be in a new governing coalition. On Wednesday, Chancellor Gerhard Schroeder, leader of the Social Democrats (SPD), and Angela Merkel, head of the Christian Democratic Union (CDU/CSU), met without any known results except for agreeing to talk further. This could lead perhaps to a so-called “Grand Coalition,” but there still is no agreement on who will be chancellor. What’s caused this highly unusual standoff in Germany? I think there are two different dimensions to the paralysis. One of them is structural and has to do with the nature of the German political system, which, because of recent German history, was designed to produce consensus and to create many blockage points within the system. So even when it works as it is supposed to, German politics tends to produce centrist policies and prevent any single party from running away with the spoils. That type of system worked reasonably well when there were two hegemonic parties, one of which would end up winning; then the other would play the role of loyal opposition. What’s happened over the last couple of decades—and especially after the fall of the Berlin Wall in 1989 and the integration of eastern Germany into a unified German state—is that the political system has become more fragmented. You now have a New Left Party, which took votes from both Christian Democrats and Social Democrats. The Greens and the Free Democrats are all substantial parties now. That has created outright paralysis. The other cause of the stalemate is more circumstantial, and has to do with the fact that Schroeder lost the confidence of many of his supporters because of the reforms he implemented and the sense that they had not yet produced any significant economic growth. That initially led to a 20 point spread in Merkel’s favor. Schroeder, however, is a campaigner par excellence, and in the weeks leading up to the vote, he gained so much ground against Merkel that the final outcome was almost a dead heat between the SPD and the CDU/CSU coalition. I think it is indicative the fact that no one really captured the imagination of the German electorate, and even though there was a sense that, “We had enough with Schroeder,” Merkel was not charismatic enough to cash in on the protest vote. Who will emerge as the chancellor, or will there be some compromise choice? I think it is too soon to say. Thus far, all of the leading figures have stated in rather unequivocal terms that they won’t play ball with their erstwhile political opponents. So Schroeder says: “No Grand Coalition with Merkel as chancellor;” the Free Democrats [allies of the CDU] are saying: “No coalition with the Social Democrats;” the Greens [allies of the SPD] are saying: “No coalition with the Christian Democrats.” It is quite likely these are intended as much for bargaining positions as for final statements. Some people have said that the reason Schroeder was able to narrow the vote so dramatically in the final weeks was that Germans could not get themselves to vote for the economic changes the CDU was talking about, aimed primarily at cutting labor costs. Is there some truth to that view? There is a sort of paradox to the vote, in that Schroeder was headed for electoral defeat in part because of his economic reforms. What were his reforms? He had focused on several different fronts. One was to try to reduce unemployment benefits; another to reduce the costs of the health care system; and also to introduce some modest tax reforms. Merkel focused less on the benefits side and more on the non-wage costs of labor, which I think many agree is the biggest impediment to growth in Germany. You have in Germany a situation in which wages are already high, and when you add to that costs that employers bear on health care and unemployment insurance, hiring workers becomes prohibitive. And Merkel was going to go after that by reducing the amount that employers would have to pay to the unemployment fund. She wanted to compensate by raising the Value Added Tax (VAT) [effectively, a national sales tax]. One of the setbacks she suffered was that an adviser she brought in from the private sector was a strong proponent of a flat tax. Even though Merkel herself did not support a flat tax, it created a huge opening for criticism from the Social Democrats, who said a flat tax was retrogressive. That hurt Merkel in the election. What impact is the impasse in Germany having on the EU itself, coming after the rejection of the EU constitution earlier in the year by France and the Netherlands? I think in some ways it is a double body blow. On the one hand, this is because, whoever leads the next government, the coalition is likely to be a weak one. That means Germany is unlikely to implement the far-reaching economic reforms that Germany and Europe need to stimulate growth. On the other hand, Europe, in the wake of the French and Dutch rejections of the constitution and a stalemate over the EU budget, is in what is arguably its most significant political crisis since its inception. You have already a weak government in France: Jacques Chirac is a lame duck president. Prime Minister [Silvio] Berlosconi’s government is teetering on the edge of collapse in Italy; Tony Blair won reelection in Britain, but had his parliamentary majority seriously reduced. And now you have stunning political weakness in Germany. That does not add up to the type of leadership that Europe needs to get out of its current turmoil. The stalemate we see in Germany today is in some respects a microcosm of the bigger debate across Europe on whether to hunker down and protect the traditional welfare state and traditional nation-state, with its largely Christian character. This is in opposition to the realization that adapting to enlargement and globalization is a question of when and not if, and [stops politicians from] getting on with the difficult tasks of downsizing the welfare state, implementing economic reforms, and making Europe more multicultural so it is better able to integrate the Muslim immigrants that it needs to replenish its diminishing working-age population. That has nothing to do with the United States, I take it? I think it has negative implications for the United States but is in no way caused by the United States. These negative implications are in two respects. One is that the United States continues to look to Europe to help grow the global economy. Second, the Bush administration, in its second term, seems to have rediscovered the merits of the transatlantic partnership. You may recall that soon after his inauguration in January of this year, Bush went to Europe with flowers in hand, saying, “We Americans love you after all.” That’s because, I think, Bush realized he needs help in Iraq, Iran and the Middle East, and the best place to get that help is from a capable and collective EU. But that does not seem to be in the offing for now. Are there intelligent people in Europe who see a way out of this crisis, or will matters just continue to drift? If you look at the political trajectory of Europe over decades, these types of pauses are not infrequent. Europe tends to have good days and bad days, but ultimately gets to its designated destination. My guess is the Europeans will regroup and get back on their horse, but this is certainly one of the more sobering moments in the history of European integration. Is a large part of this due to the quick expansion to the east to allow membership from the former Soviet bloc? The quick expansion to the east is probably the most significant cause of a foul mood of the electorate towards the EU. That’s partly because enlargement is in some ways a scapegoat for other ills. That’s where the story of the “Polish plumber” in France doing work more cheaply than French plumbers touched a raw nerve during the buildup to the constitution vote, didn’t it? Exactly. The heart of the problem in France is the absence of growth and the lagging economy, which has much more to do with domestic policy than EU enlargement. In many respects, enlargement and EU reform represent the solution to the problem, because it would help EU member states to deal with globalization. But instead of facing that reality, you have opponents of the constitution blaming the EU for allowing immigrants in from central Europe and ultimately, Turkey—if Turkey were to join—and calling the constitution “an Anglo-Saxon document,” too liberal in its orientation. Those sorts of charges gained a lot of support for the ‘no’ vote. Let’s talk about Turkey. Negotiations on Turkey’s accession to the EU are supposed to start next week. I believe the dialogue has already begun and there will be a lot of fudging going on in the coming weeks as the discussions go forward. There is no chance of Turkey’s being admitted now, right? No, there isn’t. And that was not likely in any case. The general idea was that negotiations would begin now and there would be a long lead time before Turkey would be ready for membership. In light of the French and Dutch ‘no’ votes and the more general opposition to Turkish membership—Angela Merkel is openly opposed to Turkish membership—the issue is likely to be put off, perhaps indefinitely, although discussions will continue so it doesn’t look as if Europe is formally closing the door. And the reaction in Turkey to Europe right now? I think there is growing skepticism about if and when Turkey would get in, as well as a growing nationalism in Turkey. This is related not just to the EU but to the United States and the Iraq war. In particular, many Turks fear a resurgence of Kurdish separatism spilling over from northern Iraq. Are relations between Turkey and the United States still strained over Turkey’s refusal to allow United States troops to use it as a jumping off point to invade Iraq? Yes. They are strained over the issues that emerged in the leadup to the war. They are strained by rising skepticism toward the United States from the Turkish public. I think American officials are alarmed by the more nationalist tone to Turkish politics.

William Drozdiak, president of the American Council on Germany, who earlier called Sunday’s parliamentary elections the “most important” in years, says the very close outcome, with neither of the two major parties able to easily command a majority, portends “great instability.” “We are entering a phase of great instability in Germany, which is far and away the most important economy in Europe and the biggest country, with 82 million people,” Drozdiak says. “It means Germany will not be able to lead the European Union out of its recent crisis over the failed constitution.” He was interviewed by Bernard Gwertzman, consulting editor for cfr.org, on September 18, 2005. As we speak on Sunday night, the initial results from the German parliamentary elections are in, and it looks like a setback for the Christian Democratic Union (CDU) led by Angela Merkel, which had been heavily favored to unseat the ruling Social Democrats, doesn’t it? Absolutely. This is a big setback for the CDU. They had polled consistently above 40 percent all during the campaign. But it looks now as if the CDU will have about 35.2 percent. Chancellor Gerhard Schroeder’s ruling Social Democratic Party (SPD) had been closing the gap the last two weeks partly as a result of his strong performance in a couple of televised debates, but also because of his pitch that his reforms were more sensitive and less painful than Merkel’s. I also think, in a way, the images of Hurricane Katrina may have played a psychological factor. Schroeder raised this in the second debate when he said, “Look at these catastrophic images. It shows what happens when you have an insensitive or lack a strong government in society. This is what we want to maintain under SPD leadership.” All of that played into his comeback in the last few days. At one point, as recently as three weeks ago, the SPD was only getting 28 percent. Currently, it looks like they’ll get 34.3 percent. This is about 4 percent less than they polled in Germany’s last election in 2002, but it is significantly better than [their numbers] a few weeks ago. Can we predict now who will be the next chancellor, or is it going to require a lot of political bargaining? I think there will be a lot of horse trading. The likelihood is the president of Germany, Horst Kohler, will probably give Merkel the first shot at trying to set up a stable government. She will probably negotiate with the SPD to see if they can come up with a common legislative platform. If that works, you would have the largest mainstream parties setting up a “grand coalition,” which has happened once before in German postwar history, from 1966 to 1969. That paved the way for the Social Democrats to have a long period in power with Willy Brandt [chancellor from 1969-1974] and then Helmut Schmidt [1974-1982]. But what will happen now is that, because Merkel has been stung so badly, she would go into negotiations in a very weak position. One of the first comments by Schroeder tonight was that there can’t be any grand coalition under a Chancellor Merkel. So it looks like he is going to play hardball. So he may hold out against the coalition with her unless he remains chancellor, right? Yes. But since she has the biggest party, I don’t think her party will let her do that. There are other alternatives. She could explore a coalition with the Free Democrats (FDP), which got about 9.8 percent, and the Green Party, which had been ruling with the SPD and got about 8 percent. That would give such a coalition more than a 50 percent majority. But there are sharp differences between the FDP and the Greens, notably over nuclear power plants. The Greens want to phase them out, and the FDP wants to keep them going to ensure enough energy supplies. Merkel has an alliance with the Free Democrats, right? Yes. That was the hope of the CDU and the FDP. They hoped that together they would have more than 50 percent. But they have fallen short and will have to explore other options. The other possibilities are that the SPD might try to form a coalition with the FDP and the Greens, but the FDP right now is saying they do not want to go into government with the SPD. Or the Social Democrats could think about going with the Greens and the New Left Party, the former communists, but this is something Schroeder himself has excluded, saying his nemesis, the SPD’s former finance minister Oskar Lafontaine, is someone he does not want to govern with. What do the SPD and the CDU have in common on reforms? Some people could say the crisis is so serious in Germany that a government of national unity or government of national emergency is the only way to push through far-reaching reforms. So maybe there is a way moderates in the SPD—particularly if Schroeder does not play a role—may say the crisis is so serious that the two biggest parties have to band together and agree on necessary reforms that can at least push the ball further down the road over the next couple of years and see how this plays out. Maybe there will have to be early elections again in a couple of years. It will be a very difficult process to negotiate, and I would bet that you will see a serious hit on the German stock markets because there will be a loss of confidence in reforms. If the parties fail to agree, can the president ask one of the parties to form a minority government? Yes. He can ask the SPD or the CDU to do so, but that would be inherently instable and would portend elections fairly soon, in a year or two. We are entering a phase of great instability in Germany, which is far and away the most important economy in Europe and the biggest country, with 82 million people. It means Germany will not be able to lead the European Union out of its recent crisis over the failed constitution. What caused the upsurge for the SPD? Was it just that Merkel was a poor campaigner? She did OK in the debates. But she is very lackluster. She ran a dull campaign. She is a colorless personality. She did not convey a lot of conviction on the stump. She looked like she was faltering and was very hesitant when she got involved in a controversy over the flat tax. She did very poorly in former East Germany, right? Yes. It is a bit strange. You would think they would feel some pride that a woman from former East Germany had risen so far in the ranks of a major party. But she got very little sympathy in the east, where there is great unemployment and the communists are still strong. So the bottom line is that things are very uncertain. Yes, it is going to be a protracted period of instability in which first Merkel and perhaps Schroeder will explore the possibilities of coalitions. Nothing can be excluded. But there is no unanimity on the reforms that are needed. Explain what you mean by “reforms.” These are changes in labor laws? Right. Primarily what is hurting Germany is that more than 5 million are unemployed, or close to 12 percent of the workforce. This is because jobs are being shed at an alarming rate. The combination of taxes and welfare benefits means that German workers have to pay [their workers] more than $30 an hour. In the United States, by comparison, it is $17 an hour. In a country like Poland or the Czech Republic, the wages are about $5 to $6 an hour. What Merkel wanted to do was make it easier to fire and hire workers, to reduce the payroll taxes. But this resonated poorly with many Germans who saw this as a way of dismantling their cherished welfare state.

This publication is now archived. What are the main issues facing voters in Germany’s upcoming elections? Germans go to the polls September 18 to choose between candidates from the country’s two main political parties, the conservative Christian Democratic Union (CDU) and the center-left Social Democratic Party (SPD). The poll comes as Germany struggles with near-record high unemployment, a growing trade deficit, and a stagnant economy. Less important to voters, polls show, but equally critical are candidates’ views on foreign policy, including the European Union’s (EU) nuclear negotiations with Iran, Turkey’s EU candidacy, and Germany’s peace efforts in the Middle East. One week before the election, roughly one-third of German voters—particularly those in former East Germany, where unemployment is as high as 30 percent—remain undecided. Who are the two main candidates for German chancellor?Angela Merkel. Chairwoman of the CDU, Germany’s longest-ruling party, Merkel is a Protestant former chemist, and the first woman to seek Germany’s chancellorship. She grew up in East Germany and rose to prominence under the tutelage of Helmut Kohl (chancellor from 1982-98). She then severed ties with him in the mid-1990s after Kohl became embroiled in a bribery scandal. At age 51, she has earned a Margaret Thatcher-like persona for her tough demeanor and conservative stances; she has “no appetite for cozy talk,” writes Jane Kramer in the New Yorker. But personality aside, her policies have won the support of 42 percent of German voters, according to a September 12 Forsa poll, putting her seven points ahead of the SPD. Barring a late surge by her opponent, experts say, she is likely to be Germany’s first female chancellor. Gerhard Schroeder. Chancellor of Germany since 1998, when he ousted the Christian Democrats after sixteen years in power, Schroeder narrowly won reelection in 2002. His reelection was largely credited to his opposition to the U.S. war in Iraq and his handling of floods that struck the eastern half of Germany three years ago. But his popularity plummeted after German unemployment hit new highs earlier this year. His SPD party, Germany’s oldest, has governed in a coalition with Germany’s Green Party for the past seven years. A native of Lower Saxony, former activist and chairman of the Young Socialists, Schroeder, 61, has appealed to German voters more because of his charisma and camera-friendly demeanor than his economic record. His approval ratings have risen in recent weeks, however, after he performed well in two televised debates with his less media-savvy opponent. How do the candidates propose to fix Germany’s economy?Polls show the primary issue concerning voters is the economy. Around 4.7 million Germans are unemployed, or 11.6 percent of the country’s workforce—close to the highest rate since World War II. Public debt has ballooned to 66 percent of Germany’s gross domestic product (GDP), and economic growth since 1997 has been a sluggish 0.1 percent, according to the World Bank. The two candidates share basically the same plan for shaking up Germany’s labor market, reforming the country’s unemployment-benefit system, and easing restrictions on employers’ ability to hire and fire employees. But they differ on the speed and scale of the reforms, and also on issues such as tax cuts and simplifying Germany’s notoriously complex tax-code system. What are the details of their plans? Merkel. The CDU chairwoman has proposed a number of reforms aimed at lowering unemployment, chief among them a controversial increase in Germany’s value-added tax (VAT) on sales of goods from 16 percent to 18 percent. The purpose of this tax increase, which will raise an estimated $19.5 billion, is to offset cuts in social-security costs for employers. Merkel also plans to relax worker protections, allow companies greater ease to hire and fire workers, and cut corporate contributions to unemployment insurance. She also favors allowing individual corporations to negotiate their own wage deals, a move opposed by Germany’s major trade unions. Some analysts also speculate Merkel’s choice for finance minister, Paul Kirchhof, a former constitutional court judge, might impose his widely discussed plan for a 25 percent flat tax. Popular in Eastern Europe, a flat tax on income is seen by some economists as an effective tool to make compliance easier and evasion more difficult. Social Democrats say this tax is regressive and would primarily benefit the rich. But rumors of the flat tax are being “totally overblown,” says Julian Knapp, senior program officer at Berlin’s Aspen Institute. “It’s sort of [Kirchhof’s] ideal world but everyone agrees this is just a utopia, not a program they’re running on.” Instead, Knapp says, Merkel’s camp is proposing “very modest” steps toward reforming Germany ’s arcane tax system—which consists of some 96,000 rules and regulations—including closing tax loopholes and abolishing 418 types of tax subsidies and exemptions.Schroeder. The SPD leader has called for continuing his so-called Hartz IV reforms—named after a former Volkswagen executive—passed in 2003, which include relaxing Germany’s rules on hiring and firing workers and enacting so-called mini-jobs, or more flexible part-time work, which pay $500 per month and free workers from paying welfare-insurance contributions. These reforms have won Schroeder the ire of Germany’s most powerful trade unions and scorn from reform-minded economists who argue his plan does not do enough to rescue Germany’s economy. On the campaign trail, Schroeder also said he would reverse his previous tax cuts, increasing from 42 percent to 45 percent the top income-tax rate for those earning over roughly $300,000 per year. (As chancellor, he cut the minimum tax rate from 25.9 percent to 15 percent and the top tax rate from 53 percent to 42 percent.) Schroeder has not repeated his 1998 mistake when he promised to cut unemployment in half by the close of his first term, but he has repeatedly promised to reduce the number of unemployed to 3.5 million. Last, Schroeder favors maintaining Germany’s Mitbestimmung system, which gives workers a more direct say in running private companies than in most other countries. How do the candidates differ on foreign policy?Both candidates have run on platforms that emphasize their economic plans, not their foreign-policy views. “Germany’s political culture is still very inward-looking,” says Ulrich Speck, a political observer based in Berlin. “Schroeder never forgets to present himself as the ‘peace chancellor,’ but there is, in fact, no public interest in foreign policy.” German foreign policy, most experts say, would not be significantly altered by either candidate. But the candidates do differ on some key international issues. Among them:U.S.-German relations. Politically speaking, neither candidate wants to be seen as pro-U.S. As Knapp puts it, “[George W.] Bush is radioactive over here.” But political observers generally say relations between the United States and Germany would be warmer under a Merkel chancellorship. “CDU, the party of [former Chancellor Konrad] Adenauer and Kohl, has always been the party of transatlanticism, while the SPD has always been tempted by neutrality,” Speck says. “[Merkel’s] sympathy for the United States is seen as her Achilles heel. That’s why she is forced to hide it.” Schroeder has strongly opposed the war in Iraq , which polls show around 80 percent of Germans also oppose. Merkel, who came out in favor of the war in Iraq in 2003, has been critical of Schroeder’s confrontational stance with the United States on Iraq and other transatlantic issues. Turkey’s EU candidacy. Schroeder enthusiastically favors Turkey’s eventual membership in the European Union. Merkel opposes Turkey’s entry but favors something short of full membership, what she calls “privileged partnership.” She told reporters that allowing in Turkey, whose population is expected to eclipse Germany ’s in the near future, would “place too heavy a political, economic, and social burden on the European Union and threaten European integration.” While polls show most Germans agree with Merkel, Germany is home to nearly 700,000 Turkish-German voting citizens—in addition to nearly 3 million nonvoting Turkish immigrants—who favor Turkey’s eventual accession. Negotiations between Turkey and the European Union are set to begin in October, though experts do not foresee Turkey joining anytime before 2015. Middle East policy. On Iraq, despite Merkel’s earlier support for the war, there is no chance of German troops being deployed there, experts say. On Iran , Schroeder has opposed Bush for his statement that “all options are on the table” for dealing with Tehran’s nuclear threat—including, presumably, a military option. The SPD leader has ruled out the military option, favoring diplomacy to resolve the European Union’s dispute with Iran. Merkel, on the other hand, would be less accommodating to the Iranians, some experts say. “She’s quite literal,” Knepp says, “and more likely to say, ‘We should enter negotiations with all options on the table.’” On Israel, both candidates have pledged their commitment to the Israeli-Palestinian peace process, as well as to preserve Germany’s “precious” relations with Israel and to continue combating anti-Semitism, both at home and abroad. Why was the election pushed up a year?Earlier this year, Schroeder’s low approval ratings, combined with a string of electoral defeats—including the SPD’s first loss in local elections since 1966 in North Rhine Westphalia, an industrial region and traditional SPD stronghold—prompted him to call early elections to ask for a mandate to continue his reforms. Experts say Schroeder expected to face certain defeat in 2006 and gambled that calling an early election might boost his support and prevent the opposition, namely the CDU, from putting together a powerful campaign. How does Germany’s system of coalitions work?Since Germany adopted its current constitution in 1949, the country has been run by a series of coalitions of different parties. The reason is because of Germany ’s electoral system; voters get to cast, in effect, two votes—one for a local candidate, and one for a party. The percentage of votes each party gets determines the number of candidates elected to the Bundestag, Germany’s parliament. A party must get at least 5 percent of the vote to win parliamentary representation. Coalitions are an important part of this year’s election. The CDU has actively courted the Free Democratic Party (FDP), a pro-business party that has a history of playing kingmaker in German politics. But some analysts expect the CDU may not win a majority, because the vote may be splintered by the emergence of the Left Party—a merger of Communists and disgruntled members of the SPD like former finance minister Oskar Lafontaine—whose popularity has picked up in recent weeks. Without a majority of the vote, Merkel may be forced to form a “grand coalition” with the SPD, some experts say. Schroeder has told party leaders he would never join a coalition as a junior partner, and has refused to combine forces with Lafontaine, despite the fact that the Left Party is polling stronger than the FDP or the Green Party. Another possible combination, experts say, is a three-way “traffic-light coalition” of SPD (whose color is red), FDP (yellow), and the Greens. Is Merkel’s gender expected to play a role in the election?Until recently, Merkel has rarely played the gender card and made little mention of the fact that she’s the first female to run for chancellor in German politics, often referred to as an “old boys’ club.” Women in Germany only began to enter politics in the 1960s and continue to hold mainly ministerial positions linked to family or youth. In the early 1990s, Merkel herself was Germany ’s minister for women and youth. “I have tried never to sit in a corner and argue my ‘minority properties,’” she told the New Yorker. “A chancellor has German interests,” she often says, not “women’s interests.” Polls show Germans do not generally consider a candidate’s gender a major factor, yet half of Germans believe her chancellorship would be “an historic advance.” As Merkel has slipped in the polls, experts say, she has emphasized her femininity more, giving up plain suits for rose-colored jackets and well-coiffed hair.

William Drozdiak, president of the American Council on Germany, and a former foreign editor of the Washington Post, says this Sunday’s parliamentary election in Germany “is probably the most important election in Germany in nearly four decades.” He says that although Angela Merkel, head of the conservative Christian Democratic Union (CDU) had been leading the polls by a significant margin, her opponent, Chancellor Gerhard Schroeder, head of the Social Democratic Party (SPD), has recently narrowed the gap.This raises many possibilities, says Drozdiak, including a forced “grand coalition” that could paralyze efforts to overcome the significant social and economic issues facing Germany today.He was interviewed by Bernard Gwertzman, consulting editor for cfr.org, on September 12, 2005.Germans go to the polls on Sunday to choose a new government. The polls for a long time had shown the conservatives—led by the Christian Democratic Union (CDU)—way ahead, but now they seem to show a narrowing. Can you give us the lay of the land right now?Well, I’ve just spent close to two weeks in Germany and there’s no question, this is probably the most important election in Germany in nearly four decades. The fate of Germany’s effort to modernize its economy really hangs in the balance. What Angela Merkel, the leader of the CDU, has been proposing is a radical restructuring of the economy to prepare Germany for the pressures of globalization.Her opponent and leader of the Social Democratic Party (SPD), Chancellor Gerhard Schroeder, has been warning the electorate that this election could transform Germany’s social-welfare system and that clearly seems to be having an effect lately. He’s tightened up the race considerably. Just a few weeks ago, polls had Merkel’s CDU party with close to 44 percent and it looked like she would rule in tandem with the smaller pro-business party, the Free Democrats, which had about 7 [percent], possibly 8 percent.Now it shows both the Christian Democrats and the Free Democrats sliding a bit because the public is clearly getting very nervous in the wake of Schroeder’s warnings about the pain of reforms. And with unemployment already more than five million, people fear a conservative government under Merkel would be just too much to bear. It’s important to note the most striking statistic today is that, in a country of 82 million people, only 26 million are working now. And the reason that the social-welfare system is under such pressure is that you have only one out of three people working to sustain this system, and that’s why it just simply can’t go on like this much longer.How does that compare with other industrialized states?That’s a proportion far lower than any other Western country.And they’re not working because they’re on pensions?Germany, for about the last twenty-five years, has had one of the world’s lowest birth rates. So, with people retiring as early as the age of fifty, you’re now reaching a state where nearly one out of two people is retired, on a fairly generous pension. Coupled with women and children, and others who may not be in the workforce, you have a lower rate of people working now than ever before in German society.These figures are just Germans, distinct from Germany’s Turkish population?That’s right, German citizens. There are about 7 million foreigners inside Germany, of which about 3 million are Turks.And they’re working?Most of them, yes—a large of percentage of them, probably a higher proportion of them than Germans working.Let’s talk about Angela Merkel, who’s not very well known, here. What is her background? Is she much of a campaigner, and how did she do in the televised September 4 debate with Schroeder? Is that what’s causing her problems?She’s distinctive in a couple of ways. One: She would become the first woman to be chancellor in German history. Secondly, she’s also from the East. She grew up in what was Communist East Germany, so she has a unique perspective on the capitalist society and the West. One of the big changes she would bring to foreign policy is a more skeptical attitude towards President Vladimir Putin of Russia. Under Schroeder, Germany and Russia have become very close. Schroeder has even proposed a strategic partnership with Russia, particularly since Russia now supplies much of Germany’s oil and natural gas. Given Merkel’s experience with Communist society and her skepticism about Putin’s authoritarian ways, she’s liable to put much more of a distance from Russia, and she clearly wants to improve the tone of relations with Washington.How is she as a campaigner?She has come across as fairly uncharismatic, somewhat colorless. She has tried to improve her style and make it much livelier in the last few weeks. She’s done something of a physical makeover. During the debates with Schroeder, I thought she held her own fairly well. The expectations were that she would have done much worse, but she actually did fairly well. Nonetheless, most of the polls right after the debate indicated that Schroeder, as expected, scored more points with his warnings that Merkel’s policies would bring much more pain than his reforms had so far.Talk about the so-called “shadow finance minister” issue.Merkel has brought a fairly controversial figure onto her team named Paul Kirchhof. He’s a former member of the Constitutional Court, Germany’s equivalent of our Supreme Court. But he’s gained a lot of notoriety because of his advocacy of a flat tax. He wants to get rid of the all of the subsidies in the German economy and cut the tax rate to a flat 25 percent.Sounds like former U.S. presidential candidate Steve Forbes.That’s right. It’s a variation of the Forbes claim. Now, that’s still a little higher than some countries in the East. I believe Slovakia has a 17 percent flat tax and some other states are talking about an even lower level. But he’s saying the way to simplify the tax structure and to get people to pay more into the system and to get rid of the underground economy, which is flourishing in Germany—a lot of people are doing odd jobs and not paying tax, and some have suggested it’s more than 20 percent of the real GDP [gross domestic product]—is to impose this 25 percent rule, and that has generated a lot of criticism.What is the criticism? Most people would benefit, wouldn’t they?He claims, of course, that it would bring more revenues in; it would make it easier for people to understand. Schroeder and other critics say this is a regressive tax. He has been scoring points with the line, “It’s not fair that a millionaire will pay the same rate as a medical nurse.” It’s seen as a regressive tax that doesn’t sit well with those who like to maintain the social-welfare state in Germany.Has Merkel adopted Kirchhof’s proposals in her platform, or is he on his own?On that particular policy, he’s on his own. She has carefully kept her distance. She’s said that she has brought him on as an adviser, but the party platform does not advocate a flat tax. She’s talking about reforms that would loosen up the labor market, make it less expensive for companies to hire. Currently, a portion of an employee’s wage and also the company itself has to contribute a substantial amount of money to the social-welfare system. She wants to make it easier for companies to hire and fire people, and to make up the difference, she has talked about a 2 percent increase in sales tax.Does Germany have a VAT—value-added tax—like they do in France?Yes. I think right now it’s 17 percent and she’s talking about raising it to 19 percent.So it’s not like the only main tax is the income tax, as in this country?No, they get a lot of money from sales tax, but that, too, is regressive in that poor people pay the same rate as rich people.Talk about the unemployment situation. Does she have a plan for getting unemployed people back to work? It’s a very high figure, isn’t it?Right. In many respects, Germany is facing a more critical situation than other countries in the West. First of all, with the expansion of the European Union toward the East, a number of countries have come into the single European market that have significantly lower wages, and as a result, the entire car industry seems to be moving to the East. In the country of Slovakia, just over the border from Germany, you now have Volkswagen, DaimlerChrysler, and BMW all building cars—even for the German market—in and around Bratislava, which is described these days as the “Detroit of Europe.” And that’s because, in order to stay competitive in the global economy with other worldwide car producers, they’ve moved to the lower wages in Slovakia—they are about one-fourth what they are in Germany. So as a result, jobs are moving to places, such as Slovakia, Poland, and the Czech Republic, where the labor costs are significantly lower.So the German workers are not following the jobs? These are local hires?That’s right. Currently, I think given the wage costs—that is above and beyond the hourly wage or the salary—are so high that it costs more than $30 an hour to pay for a German worker. And in the U.S., the level is at about $17 on average.Do the two parties have differing views on how to get the unemployment rate down?I think the Social Democrats are trying to claim they would do it in a less painful way; that they would protect the safety net that enables people to collect unemployment benefits for a fairly long time; that they want to protect against what is viewed as exploitation by companies who would be tempted to fire workers summarily. Nonetheless, the pressures of the global economy are such that jobs are being shed at an alarming rate. Volkswagen just announced the other day they are cutting 10,000 people from their workforce around their headquarters in Wolfsburg. This, in fact, is in Chancellor Schroeder’s own neighborhood. It’s very serious in terms of finding a way for Germany to become more competitive.You said at the start this is the most important election in four decades. Could you explain why?Well, I think it’s because the reform process has been put off for so long, now. First, the election of 1990, when Chancellor [Helmut] Kohl was reelected for the third time, was shaping up as a battle over where Germany will go in the twenty-first century. Will it become a much more competitive environment? Will it lose its place as the world’s third-largest economy and the world’s biggest exporting market? That campaign was overtaken by events, namely the rush toward reunification. Since then, there has been paralysis and stalling on really coming to grips with reforms.This time, I think, both Schroeder and Merkel realize that time is running out. Unless Germany adapts, it risks a sharp drop in terms of its competitive place in the world. And the danger is that mainstream parties, the Social Democrats and Christian Democrats, could start losing to more extremist visions of the future. Already you have a new wrinkle in this year’s campaign—a left-wing, anti-globalization party called the Left Party, which is headed by Oskar Lafontaine, a former left-wing Social Democrat who bolted the party and has set up this new party in conjunction with the former Communists of Eastern Germany. He’s fishing for votes on the far left and also the far right. He’s attacking immigrants, as well as saying, “We need to set up a more socialistic structure.” So the risk is that if the reform suggestions of the mainstream parties fail, voters will turn toward some of these more extreme visions. We all know where that led Germany in the past.What are the chances of the vote being so close it would lead to grand coalition of the CDU and SPD?The last few days suggest more and more that may be the case. If the Christian Democrats fail to get a majority with the Free Democrats, they will be forced to turn toward the second-biggest party, the Social Democrats, and set up a grand coalition. Right now, I believe the CDU has about 41 percent according to some polls and the Social Democrats have about 34 percent. But a lot of political commentators feel this will just be another recipe for further paralysis because their visions of the future are so much apart that they would have a hard time agreeing on a common platform. The likelihood is that this will lead to continued stagnation. The government would probably fall apart within a couple of years and we would be facing new elections and Germany would lose two years of precious time without making much progress.At one time, there was a grand coalition in Germany, right?Yes, from 1966-69 there was a grand coalition.Who was the chancellor then?The chancellor at that time was Kurt Georg Kiesinger, a conservative Christian Democrat. Willy Brandt went on to win the elections in 1969 and ushered in a long period of Social Democratic rule.What also makes this election important is that it will set the tone and the pace for reform across Europe. France is going to the polls in 2007. [French Interior Minister] Nicholas Sarkozy, who is advocating a similar package of reforms to Merkel’s, is clearly hoping for her to win the election in the hope that this would give him boost in his fight against President Jacques Chirac and his anointed heir, Dominique de Villepin, the prime minister.What impact will this have on U.S. relations with Germany?As I said earlier, the desire of Merkel and her team is to restore good relations with the United States. I think she will make an early visit to Washington to meet with the President. I don’t think, however, that this is going to lead to significant change in policies. While the tone may improve, the policies won’t necessarily change and, in fact, it could lead to some further friction. For example, Merkel and the Christian Democrats do not want to see Turkey become a member of the European Union, which is contrary to the position that Schroeder and his foreign minister, Joschka Fischer, have fully embraced in harmony with Washington. The Christian Democrats will push for a special partnership between Turkey and the EU and that’s a difference in opinion with Washington.Secondly, she certainly will not approve sending any German troops to Iraq. Germany is already the largest troop contributor to the western effort in Afghanistan, and it will continue playing a strong role there in support of the United States, as well as in the Balkans, where Germany has several thousand troops in the international peacekeeping mission. I think she will keep that going, but she certainly isn’t going to change her policies on Iraq.

Josef Joffe, the publisher and editor of the Germany weekly, Die Zeit, says that the effort by the French and Germans to prevent the United States from using its power in Iraq failed and there now is a “sobering-up” process underway. This is coming when it is clearer than ever that the Europeans are suffering enormous economic problems because of the continuing efforts to bolster “the old economies” of steel, coal, and agriculture at the cost of the new. As to the future of NATO, Joffe, a well-known commentator on both sides of the Atlantic, says that the alliance set up in 1948 in effect died when it “won”--when the Soviet Union broke apart in 1991. But he says that to his surprise, a “NATO II” seems to be emerging consisting of many European nations. Joffe was interviewed by Bernard Gwertzman, consulting editor for cfr.org, on June 16, 2003. Other Interviews At the start of the Iraq war, it was clear that Europe and the United States were far apart on many issues. This led to strong anti-French sentiment in this country, and in Europe, President Bush was pilloried. How are things in the aftermath of the war? A certain sobering-up process is underway. And the reason is that some Europeans, notably the Germans and the French, went for a power-play in order to stop the use of American power in the Middle East. And they did this in the [United Nations] Security Council, they did this in terms of rhetoric, they did this by recruiting the Russians. On March 5 for instance all three of them appeared on stage together and said, “We are all saying no to the war.” But although this was a full-power press by Germany and France, it didn’t work. They could not muster the power to stop American power. That is the first and most important factor. The second factor is that they’ve learned there’s a cost to anti-Americanism. It may help you, as it did in [German Chancellor Gerhard] Schroder’s case, to win a very tight election in September of last year. But there’s a cost in terms of having bad relations with “Mr. Big” that’s not easy to sustain. Has the United States made the French and Germans pay? The Bushies have been cleverer than one normally gives them credit for. The first thing they did was to break up this axis. Although [National Security Adviser] Condoleezza Rice said the famous line, “Punish the French, ignore the Germans, and forgive the Russians,” what they actually did was something different. They made a conscious attempt to flatter the French. The French have much more clout than the Germans. They have a veto in the Security Council. This drove a wedge between the [French and Germans], and then the United States ignored the Germans and Schroder in a pretty demonstrative way. Are you talking about the Evian meeting of the Group of Eight in early June in particular? I am talking about all these symbolic moves, which work in personal life and apparently work in public life as well. There was this demonstrative flattery of [French President Jacques] Chirac and demonstrative ignoring of Schroder. The Germans have tried hard ever since [the Iraq war ended] to get at least partially back in America’s graces. And you know how the European press is. I would say that in general the German press, like the European press in general, is very critical, particularly of Bush’s foreign policy. But then being the press, they also have the instinct of those sitting in the Roman Coliseum and watching other gladiators perform. And when they see that Schroder does not get access to the White House, does not get a smile, then that instinct takes over and they start dumping on him. That has egged on Schroder in a tremendous way, especially since his administration was very demonstrative toward the opposition. So when Frau [Angela] Merkel, the opposition leader [of the Christian Democratic Union] shows up to visit [Vice President Richard] Cheney, and suddenly out of nowhere, Bush comes in to welcome her. It is a silly game, but it is a high-stakes game. To break up this French-German axis, that was a quite clever move. If there hadn’t been a parliamentary election last September, do you think Schroder would have adopted such an anti-war position? No. This gets into the nitty-gritty of German domestic politics. Let’s start with the numbers. Throughout the summer, leading up the September election, Schroder was trailing by six to seven points because of the economic situation. Then, he made a rather obvious move. He was looking at the strategic weakness of the Christian Democrats, the conservatives, in the former East Germany. The population there is more pacifist, more anti-American than the rest of the population. And in the end, that’s where he won the elections. If you look at the electoral map of Germany, you would see that East Germany is practically an SDP [Social Democratic Party] country. That’s where Schroder won the election. How has Schroder been doing in the local German elections since last summer? In the end, foreign policy doesn’t trump domestic politics. You can go just that far with jingoism, or in this case, pacifism. In Germany, there were two critical regional state elections, in Hesse and Lower Saxony. The SPD was wiped out in Hesse, which used to be a traditional “red” state. The conservatives garnered an absolute majority. Lower Saxony is Germany’s “Texas.” That’s where Schroder comes from; that’s where he governed. It is Schroder-country. The Social Democrats were decimated there too. So, the moral of this story is that in the end, domestic politics is more important. There is relentlessly rising unemployment, relentless refusal of the economy to go back into a growth mode. And Germany is now officially in recession. It has now had two quarters of negative growth and 5 million unemployed. That will get you to 10 percent. That is quite an unemployment rate. I would extend this diagnosis to all of continental Europe. The way Europe has organized its public and economic life after World War II was enormously successful during the growth period of the 1950s and 1960s. It was the period of the “Economic Miracle.” But now, growth is hampered throughout Europe. There are large unemployment rates, large rates of subsidies that protect the old economy and withhold resources from the new. We subsidize steel, coal, and agriculture to an enormous rate. These are 19th century industries. So, in short, we have built in rigidities to our system— large rates of taxation, large rates of subsidization, large rates of welfare spending, large structures of regulation, and labor laws which make firing virtually impossible. What’s going to happen with NATO? Do you agree with Council on Foreign Relations Fellow Charles Kupchan that NATO will just die out in a decade or so? You know there is a very simple but profound law of history: Alliances die when they win. No alliances last long after victory. NATO certainly did win. And it won on Christmas Day, 1991, when the Soviet Union ceased to exist. It self-destructed. NATO has been dead ever since. But a different kind of NATO has survived which may last longer than we think. The funny thing about this alliance is that it is supposed to be dead but it keeps growing. More want in than out. But it is not the old NATO that would either act together or not at all. So it is a NATO II. I think there is more of a future for the alliance than history would lead us to believe. The traumas of the first part of the 20th century are so completely embedded in the Europeans that they remain attached to two keys of NATO. One is denationalizing defense. As long as we don’t go back to a purely national defense strategy, we will keep one genie in the bottle, which is a strategic arms race. And the other key is the idea that NATO was to have America as a European power, as an actor which has the will and wherewithal to use military power. And those two things have continued to put more life into NATO than you would have thought. As a European, what would explain this very strong animosity towards Bush? Is it because he’s a Republican and not an “intellectual?” President Ronald Reagan wasn’t very popular when he took over either. Europeans naturally are more drawn to Democrats, because they’re “left.” The press in Europe, as in this country, is more liberal/left, and there is the tendency to [take] the template of European politics and place it on American politics and say, “Well, Republicans are to the right and bad, social Democrats are good.” So that’s one factor. The second factor is that the Clinton administration in part conducted American foreign policy in the way of those Renaissance meetings, organized by the Clintons. This big schmooze-fest— you hang out, you drink, you chat— and the style of the administration was a bit like that. Madeleine [Albright, Clinton’s U.N. ambassador and later Secretary of State] went around and talked up Joschka Fischer [Germany’s foreign minister, a prominent member of the Green party]. Clinton, for all of his failings, was and is a very charming, lovable kind of guy. Now Bush and Cheney and [Secretary of Defense Donald] Rumsfeld are not cuddly, Renaissance-weekend types. Somebody like Rumsfeld would rather lose a good friend than a good quip. There’s a certain arrogance of demeanor that doesn’t sit well and those who depend on American power suffer the consequences. So the style of an administration does matter, but it doesn’t solve the big problem, which is the vast and growing disparity of power between the United States and Europe. Many people think the French were really envious of American power and were trying to block it? Here are these Europeans, former great powers, former rulers of the universe at one point or another— Britain, France, and Germany— and they have been declasses as the French would call it, and they’re being more declasses by the day as American dominance of world affairs increases, and as the one factor which kept in check American power, namely the existence of another superpower [the Soviet Union], disappeared. So America is becoming absolutely more powerful, and certainly is becoming militarily more powerful. There’s nothing to counterbalance U.S. power. And what you see is an attempt by some Europeans to balance against the United States. Even if next year Howard Dean becomes president, this will not change the basic nature of the game, which is that American power will not end.