Can Merkel’s cabinet really deliver?

Date: 20/10/05

I first met the future German Chancellor in Strasbourg 15 years ago, when she was spokeswoman for the last East German prime minister, Lothar de Maizière, shortly before reunification.

With no experience of European affairs, the young East German Angela Merkel appeared tough, determined and efficient. She has since gained experience in European affairs by personal contacts and by participating actively in meetings of the European People's Party.

The appointment of the Socialist Franz Müntefering as vice-chancellor is also a good sign. Before becoming Schröder's chief party/government co-ordinator, he played a positive ministerial role in the Council of Transport Ministers.

On the face of it the auguries for a fruitful European policy are good. The problem is whether a coalition government of two bitter rival parties can really prove a durable vehicle for the kind of heavy-duty politics it will now have to face.

To rekindle European solidarity a German contribution to a budget at least marginally over the magic 1% of gross national income limit seems a sine qua non. How else to unblock the 2007-13 financial perspective under the UK presidency of the EU? The new Eastern European member states also insist on a revision of the Schröder-Putin pact, generally seen as crass national egoism (or worse) by Poland and the three new Baltic member states.

How much room for manoeuvre will it really have, this government widely seen as Social Democrat with a Christian Democrat chancellor as figurehead? The implications for the EU are potentially enormous. "If the leadership does not come from Germany, we will be paralysed," says Peter Sutherland, former competition commissioner and former director-general of the World Trade Organization (WTO), bluntly.

But he told the European Parliament's Kangaroo Group this week he was optimistic, foreseeing a new vibrancy in the German economy which would refloat the boats of its neighbours

The litmus test of success is the economy and delivering new jobs. Two main obstacles need to be overcome:

The reluctance of Germans to recognise their real position under the rules of worldwide competition and of European demography and;

the limits to expansionist policy after four years of excessive budget deficits.

Unlike in France, where 'cohabitation' was a byword for immobility and stagnation, the last grand coalition in Germany in the 1960s grabbed the opportunity to make bold reforms. The new government could prove just what is needed in opening up the internal market and in international trade. It will mean showing leadership in the battle over the services directive and making sure the Doha trade round is restarted before the WTO Hong Kong conference in December.

The two new ministers from the Bavarian Christian Socialists, Edmund Stoiber for economic affairs and Horst Seehofer for consumers and agriculture, are untried in the international area. And the domestic pressures against reform, or liberalising the markets, are huge. If the grand coalition proves, in practice, to be on the blocking side in the European Council, the doors leading back to international protectionism are wide open and will be almost impossible to shut.

More than anybody else, Angela Merkel is condemned to make a success of her government. If it fails, the Christian Democrats risk the same fate as Schröder in the last elections. He fell because a new Leftist party seduced too many SPD voters. A Merkel failure risks opening the 5% clause letting an extreme right party into the Bundestag. It could condemn the Christian Democrats to indefinite opposition or to a grand coalition at any price; there would be no viable alternatives.

• Rainer Hellmann is European correspondent for Fuchsbriefe, Berlin, a leading German newsletter for enterprise.

Analysis feature in which the author discusses prospects for the incoming German Government under Angela Merkel.