German politics. The come-back chancellor

Gerhard Schroder may just have bounced back too early

AH, TO be loved again. “Let's welcome the chancellor of reforms,” were the words that met a visibly tickled Gerhard Schroder at the World Economic Forum in Davos. Things are looking up at home, too. For the first time since the 2002 election, a poll has put the ruling left-of-centre coalition ahead of the opposition. A year ago, anybody predicting such a change would have been laughed at. After a string of disastrous elections, the question was not whether Mr Schroder would go, but when. Last March he resigned as leader of the Social Democratic Party (SPD). In the summer, he faced huge protests against labour-market reforms. Pundits had him leaving this May, after another election loss in North Rhine-Westphalia, the heartland of the Social Democrats.

Now some are suggesting that Mr Schroder has a good chance of winning a third term in September 2006. But can his amazing recovery last? The question is more pointed after this week's announcement that unemployment now exceeds 5m, a post-war record - though the figure is not seasonally adjusted, and partly stems from labour-market reforms in January.

To understand the SPD's bounce-back, it helps to consider why it dropped to almost 20% in the polls last year. Mr Schroder's economic reforms, known as Agenda 2010, were unpopular, erratic and badly communicated, both to voters and to party members, who quit in droves. And the opposition, led by Angela Merkel of the Christian Democratic Union (CDU), offered an attractive alternative. Yet now Germans seem to have accepted the case for economic reform. When Mr Schroder refused to give in to protests, they admired his seriousness and resolve. In other ways, too, they seem more in tune with him, for instance when he criticises the whining to which Germans so often default. It also proved clever to hand the party leadership to Franz Müntefering. Of pure SPD bedrock, “Munte” has reconciled the party's soul with Agenda 2010, while offering it a few left-wing gestures. This has let Mr Schroder find a new role as a sort of chancellor-president, who hobnobs with the powerful abroad and enters the fray at home only when big issues are at stake.

Even as the government has got its act together, the opposition has done its best to self-destruct. For months, the CDU and its Bavarian sister party, the Christian Social Union (CSU), bickered over health-care reform. Then two key CDU leaders quit: the party's economic guru, Friedrich Merz (because he had had enough), and its secretary-general, Laurenz Meyer (because he had failed to admit to making money on the side). The Free Democrats (FDP) are not in a much better state, with a generally unimpressive leadership.

If national elections were held now the government would probably win, since the SPD's coalition partners, the Greens, who have just celebrated their 25th anniversary, have also gained ground recently. A big test will be the state election in Schleswig-Holstein on February 20th; and, even more, the election in North Rhine-Westphalia, the most populous state, on May 22nd. In both, the SPD and the Greens were on the ropes but have recovered, if not yet by enough.

Even if the ruling coalition wins both states, however, the 2006 election will not be a given for Mr Schroder. He faces three main challenges. The first may be the easiest to overcome: his government is still prone to making unforced errors. One recent example was the plan to move a national holiday from October 3rd to the first Sunday in October, to boost growth and tax revenues. After protests that the government was putting economics above national symbols, the plan was shelved.

The second challenge Mr Schroder can do little about, in the short run: the economy, and especially unemployment. Even by its own rosy forecasts, the government expects the economy to grow by only 1.6% in 2005, and unemployment to average 4.5m. This explains why Mr Schroder is so keen to gut the euro-zone's stability and growth pact: more cuts to trim the budget deficit would weaken a domestic demand that is already too feeble.

Mr Schroder's third challenge will be the most interesting. At present he shows no inclination to push ahead with the further reforms that are clearly needed. Many of his Agenda 2010 measures still have to be implemented, he argues, and society can digest only so much at a time. But after the state elections he risks coming across as somebody who wishes to sit things out. Unfortunately, Mr Schroder is unlikely to go for an Agenda 2020.

Much will depend also on whether the opposition gets back on track. Some observers predict that, if the CDU loses both state elections, Ms Merkel will have to make way, perhaps for the increasingly popular Christian Wulff, the premier of Lower Saxony. But it would be a mistake to underestimate her own will to reach the top. She has just installed a new secretary-general, Volker Kauder, a staunch conservative and good organiser, who could become the CDU's Mr Müntefering.

Like an athlete facing a race, Mr Schroder must realise the danger of peaking too early. But it no longer seems to faze him. He has let it be known that, if he has to step down after two terms, it would be no catastrophe. German chancellors usually stay for only eight years; Helmut Kohl lasted longer only because of unification. And, as Die Zeit recently pointed out, Mr Schroder has an appealing alternative to another election victory: Viktoria, the three-year-old orphan from Russia whom he and his wife adopted last summer.

Article considers the apparent gain in popularity of the German SDP government and its Chancellor, Gerhard Schröder despite a difficult economic situation, high unemployment and moderately radical labour and welfare reforms.

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