Germany’s impasse. A system in crisis, a country adrift

Post-election paralysis has dashed the hope that Germany could build quickly on its economic recovery and embrace reform

YOU'VE heard of the perfect storm; now meet the perfect stalemate. After its parliamentary election on September 18th, Germany seems stuck in the worst logjam of its post-war history. None of the coalitions that might form a parliamentary majority look possible. Worse, Gerhard Schroder, the chancellor, and Angela Merkel, the opposition leader, both claim to have won. If no player in this poker game backs down, you can expect a showdown not seen since the Weimar Republic. New elections may be the only way to break the deadlock.

That concern may prove overdone. But even if a stable government does emerge in the days and weeks to come, one thing is already clear: Germany is unlikely any time soon to become the model of a big, rich country that can muster the political courage to reform itself. And the fledgling recovery of Europe's biggest economy could then peter out.

This has been a rude shock for many Germans, especially businessmen. While the margin had been shrinking, most polls forecast victory for the combined opposition of Christian Democrats (CDU) and Free Democrats (FDP). Even days before last Sunday's vote, pollsters said the CDU would top 40% - and that Angela Merkel, the party's boss, would at least be unchallenged to head a big left-right coalition.

Yet when the exit polls began circulating on Sunday afternoon, pundits were amazed. And the final tally confirmed the upset: the CDU and its Bavarian sister party, the Christian Social Union (CSU) came in at only 35.2% of votes, not even a full point ahead of Mr Schroder's Social Democrats (SPD) at 34.3%. The best news for the opposition was the FDP's good showing, just shy of 10%. The Greens and the Left Party, a new amalgam of ex-communists from the east and western lefties, got 8.1% and 8.7% respectively.

Drilling deeper, the results look even worse for the CDU and Ms Merkel. The SPD led the field in 12 of Germany's 16 states, many of which had seen big CDU wins in recent state elections. Most notably, the SPD again overtook the CDU in North Rhine-Westphalia (with 40%, compared with 34.4% for the CDU). It was the SPD's crushing defeat there in the spring that led Mr Schroder to seek early national elections. Yet these gains for the SPD were not enough to compensate for new losses to the Left Party. As a result, neither the governing coalition nor the opposition managed to win the absolute majority of seats needed to elect a new chancellor. This implies one of two outcomes: either the CDU will have to form a grand coalition with the SPD, or each big group must find at least one small party with which to form an alliance. Yet neither the Greens nor the FDP (nobody will talk to the Left Party) appear keen to co-operate.

One big-small combination, called the “traffic light coalition”, would include the SPD (party colour: red), the FDP (yellow) and the Greens. The other would unite CDU, FDP and Greens in a “Jamaica coalition”, so-called because the parties' colours (black, yellow and green) match that island's flag.

What is to blame for this stalemate? For one, a complex election law, giving two votes to each citizen. With their first, they elect half their legislators directly. But it is the second ballot that shapes the composition of parliament, giving Germany a partly proportional form of representation. This was fine as long as there were only two big parties (the CDU and SPD) and one kingmaker, the FDP. Now that both titans have shrunk (their combined result has dropped below 70%) and the Greens as well as the Left party have crossed the 5% threshold for parliamentary representation, building a coalition with a majority has become very hard. In Britain, with its first-past-the-post system, Ms Merkel would now be forming her government, and grooming herself as a German version of Margaret Thatcher.

A nation splits

Yet the messy result and the growing number of parties also reveal splits in German society, especially over economic change. About half of voters want to press ahead (as Ms Merkel wanted), while the other half would prefer to continue muddling through (Mr Schroder's proposal), according to polls taken after the election. This also explains why voters had such a “trembling hand”, says Richard Hilmer of Infratest Dimap, a polling firm. Many clearly changed their minds in the final days, or moments, before the vote.

Perhaps more importantly, the two main camps are also split within, according to Franz Walter, a political scientist at Gottingen University. Many of those who cannot cope with an accelerating, globalising, knowledge-based society (or fear they cannot), he argues, cast their ballot for the Left Party. At the other extreme, the winners in the globalisation game, the “busy burghers”, who are losing patience with slow state bureaucracies, opted for the FDP. This, perhaps even more than the fear of a do-nothing grand coalition, prompted many CDU voters to give their second vote to the liberal, pro-reform party.

Yet the main culprits are probably the two candidates for chancellor themselves - for deepening these rifts rather than trying to bridge them. Ms Merkel now appears to have been the wrong candidate to sell unpalatable reforms. Many see her as disciplined and hard-working, but not likeable or dynamic. The remarried Protestant from eastern Germany may also have scared away voters in the more Catholic, conservative south. In Bavaria, the CSU vote dropped below 50% - a political revolution in that hitherto one-party state.

The CDU candidate also ran a lacklustre campaign, making many small unforced errors and one big mistake: the nomination of Paul Kirchhof, a judge-turned-professor who favours a flat tax, as her prospective finance minister. This not only confused Ms Merkel's message (her programme included a different kind of tax reform), but also gave the SPD a badly needed boost since it allowed Mr Schroder to switch from a tired defence of his own reforms to an assault on Ms Merkel.

A stiff-necked pair

But it is above all the stubbornness of both the chancellor and his challenger that has led to the current deadlock: both refuse to concede defeat - one with a good argument, the other with a less compelling one. Ms Merkel insists that she ought to lead the next government: the governing coalition has lost and the CDU and CSU now form the biggest parliamentary group. Mr Schroder says he should remain in office: people should see the CDU and the CSU as separate parties - making the SPD the strongest party in parliament.

Even some SPD leaders admit that this argument is questionable (although the CSU has always insisted on its independence when it comes to getting state money). Indeed, Mr Schroder's real train of thought is very different. Although most of the media had already written him off, he has single-handedly achieved the near-impossible with personal popularity and campaign magic: a respectable result for the SPD. To him, it seems, he has won a virtual presidential election.

This is at least how Mr Schroder behaved on election night. He first gave a speech worthy of Caesar to supporters at SPD party headquarters in Berlin. “I'm proud of the people of our country who didn't give in to media manipulation and power”, he said, to loud cheers. Later, in a televised debate, he appeared so punch-drunk that observers were left amazed by the intoxicating effects of victory. He refused to shut up, challenged his journalist interlocutors and seemed to question the whole electoral process: “You can't just demand power for formalistic reasons!”

Yet his behaviour may be more rational than it seems. By confronting the CDU head on, Mr Schroder hopes he can make that party start bickering again and even bring down Ms Merkel. In the hope of encouraging Ms Merkel's rivals to unseat her, he has reportedly offered the CDU a deal like the one made by Israel's main parties in the 1980s: he would remain chancellor for two years, then let a CDU leader have the job.

If this is Mr Schroder's strategy, it does not seem to be working so far. In a show of solidarity, the CDU's parliamentary group re-elected Ms Merkel as their chairwoman with a whopping 98%. Meanwhile, she and the SPD's boss, Franz Muntefering, are both trying to build a Jamaica and a traffic-light coalition respectively. But such efforts are unlikely to succeed: the FDP refuse to form a coalition with the SPD and Greens because it ruled that out during the campaign - a vow that impressed voters. And the cultural gap between the CDU and the Greens is vast. In the words of Joschka Fischer, about to step down as parliamentary leader of the Greens, it is hard to imagine bonding with Christian Democrats over joints and reggae.

Unsurprisingly, there is now feverish speculation about the next move. There is unlikely to be a big shift until October 2nd, when voters in a district of Dresden will cast their ballots. (Voting had to be postponed for two weeks there after the sudden death of a parliamentary candidate.) Contrary to what had been expected, the vote will not deprive the CDU of its place as the strongest party in parliament even if all the district's citizens vote SPD (the CDU may, however, lose a seat if it gets more than 41,226 second votes - another oddity of German election law.) Forming a coalition before the Dresden vote, in any event, could cause legal problems that would void the entire election.

What comes next is anyone's guess. Forces of reason hope that Mr Schroder will get off his Gaullist high horse and let Ms Merkel lead a grand coalition. It is also possible that both will step down, letting others take over the reins, most likely Roland Koch, the CDU premier of the state of Hesse, and Peer Steinbruck, the former SPD premier of North Rhine-Westphalia. Such a solution has been dubbed the “Glienicke Bridge ” - -the place in Berlin where spies were swapped in the cold war.

More likely, Mr Schroder will continue to gamble, forcing a parliamentary showdown. For this, the constitution lays down a clear script. The new parliament has to be constituted at least 30 days after the election, on October 18th at the latest, when it will also vote on a candidate for chancellor proposed by the federal president, Horst Kohler. If this proposal doesn't win an absolute majority, the current chancellor stays in power while parliament has another two weeks to elect the same candidate or another one, with an absolute majority. If this fails, a simple majority suffices - but Mr Kohler must then decide whether to accept the vote or dissolve parliament and call a new poll.

Everybody expects Mr Kohler to propose Ms Merkel, if she has not been dethroned by her own camp. Since she is unlikely to win an absolute majority either on October 18th, or in the two weeks after this first vote, high noon will be in early November: parliament will have to decide whether it wants to keep Mr Schroder or elect Ms Merkel. The incumbent could get votes from the Left Party, while the challenger could win some from the Greens. If this fails to produce an absolute majority, Mr Kohler may well call new elections, either later this year or early in 2006.

Mr Schroder may yet win the biggest gamble of his career. He might, in effect, transform Germany from a parliamentary democracy into a presidential one - recalling what Charles de Gaulle did to France, more formally, when he created the Fifth Republic. That may win the chancellor a place in history, but will it solve Germany's economic problems? In the campaign, he never said what he would really do if re-elected. In any case, he is unlikely to achieve the goal he proclaimed when calling early elections: a stable majority for reform. Last week, it seemed that Mr Schroder might have realised his time at the top was up. But reports of his political death turned out to be exaggerated.

Post-election paralysis has dashed the hope that Germany could build quickly on its economic recovery and embrace reform.

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