Economics, German Politics

Do it the German way, if you have to. But do it.

Gerhard SchröderThe Social Democrats (SPD) seem somewhat desperate these days. With the general elections looming in only 48 days and the SPD still trailing the Christian Democrats (CDU) by about five cruicial points, Chancellor Schroeder kicked off the ‘official’ SPD campaign in Hannover saying that his government would contine to conduct business, that is economic policy, “the German way” – as opposed to the American way of social security, of course.

While campaigns are not usually a good opportunity for serious policy analysis, this statement is actually interesting, because it demonstrates to which extent this government is at loss about its economic policy. A few weeks ago, the chancellor tried to gain points among the reformist voters who helped him into office back in 1998 by proposing to pursue the implementation of the proposals of a working group (the “Hartz-commission”) under the direction of a member of the VW-board.

These proposals include serious supply side changes to the incentive structure of the German labour market regulations. The deal he tried to cut was – back me again and I’ll be in a better position to keep the Unions in check than a conservative-liberal coalition so I could actually implement the plan.

While this calculation may be right if – and it certainly looks as if – Schroeder himself is the only argument that could keep the SPD in office, many voters seem to have lost their faith in his ability to deliver. After all, they signed precisely that deal in 1998 and the only changes the SPD made to labour market regulation, even after the departure of my-heart-beats-on-the-left finance minister Oskar Lafontaine, made it even more rigid than before.

So it seems the SPD campaigners now believe that they will have to rely more on the votes of the traditional social democratic core than they thought and thus start a campaign to defend “the German way” – the corporatist rhenish capitalism – of organising the economy. Not helpful, you might say and you could be right.

But I still believe in Schroeders deal. Especially if the SPD has to cut a deal with the Liberals after the election instead of the Greens whose very knowledgeable spokesperson for budgetary and economic matters, Oswald Metzger, will not return to the Bundestag due to plainly stupid electoral regulations, once conceived to promote the role of women in the Green party.

So I fear in a coalition with a technically neoliberal chancellor they might try to appeal to leftist tradiationalists and slow down necessary reforms. I would certainly miss Joschka Fischer and will dearly deplore the lack of social progressiveness in the FDP but as things stand today I figure a coalition of SPD and FDP will be the best deal this country can get.

So if Schroeder has to praise “the German way” to be reelected, be it. In any case, I would advise you not to listen too closely to any politician over the next 48 days, it’s campaign time. If you’re campaigning yourself, you’re a journalist or you’re into advertising, you might have have fun.

All others – try to spend the rest of the summer abroad.