The reelected German SPD-led government is having a hard time these days. An opposition spokesperson yesterday stated that it was now offically allowed to call Hans Eichel, the finance minister, a liar (for he said he did not know about the looming deficit before the election) and it will be next to impossible to find a paper not bashing the government for its troubled first weeks. The Economist is no exception here.
While almost everybody (except for the powerful service union leader Bsirske, who publicly stated this weekend that he has yet to see the crisis) agrees that Germany is badly in need of some deregulation, especially concerning the labour market, things are a lot harder to do than to talk about. Especially given the troubled economy which will make it much more difficult for the government to produce visible results after much needed structural reforms.
To reform the labour markets is one important step. But it is a politically troublesome one if it only means to cut welfare without more people actually getting jobs because of lacking demand.
And it is a politically even more troublesome step if the powerful unions, as always pursuing their insider-ousider game, are cashing in their price for supporting the chancellor when his campaign looked the bleakest last summer.
So what is the government doing? It is proposing a problematic incoherent austerity package in combination with redistributive measures which the unions approve of but which are increasingly despised of by a growing majority of people.
However, I believe, the chancellor thinks he can play a game because most of those laws have to be approved by the upper chamber of the Bundestag, the Bundesrat, in which the conservative opposition (CDU) currently holds a majority. So he proposes legislation to service the unions knowing it does not pose a great risk supposing the opposition will block it anyway.
After that he will be able to tell the unions to keep quiet whilst actually going to reform things.
Am I giving Schröder too much credit? There’s one big problem with such a strategy: It depends on the key players to silently cooperate. If the CDU actually lets some the “union-reforms” get through the upper chamber in the hopes that the following implementation will anger a significant amount of previous Schröder voters it won’t work. And if Schröder can’t credibly blame the opposition for blocking the union-proposals, he will not be able to escape the unions’ embrace.
It’s a risky strategy and, of course, I don’t know if it’s actually what is happening. But it does make strategic sense to me. The SPD has probably already lost the two upcoming regional elections because of the revelation of the ever increasing deficit just after the general elections (which the government is only partly to blame for). Should that also be the perception of the government and the opposition leaders, the silent cooperation may have already begun.