Germany. Angela Merkel’s chance

A grand coalition needs to implement reform, and then sell it

THE new chancellor looks utterly different from all Germany's post-war leaders--and not just for the obvious reasons. What separates Angela Merkel from her predecessors is not so much her sex, her relative youth (at 51), her preference for quiet methodical work over snazzy media savvy, or even her east German background. Ms Merkel's real distinguishing mark is the fact that she is a tough-minded liberal, in a country where the establishment remains soggily social-democratic. She genuinely believes in clearing away the obstacles that are preventing Europe's biggest economy from realising its potential--and is prepared to take political risks to do so. Indeed, were she a more cynical sort of politician, prepared to offer sops to special interests and lobbies, she might now be forming a centre-right government on her own, instead of presiding over a tortuous effort to construct a left-right coalition.

Ms Merkel's personal qualities, and her steady principles, are all welcome as far as they go. But the risk is that the good news from Germany may end there. That is not because left-right coalitions are a bad thing in themselves. German politicians are adept players at a bizarre political game in which they take turns to compete furiously and co-operate closely, and the result is not always disastrous. The last grand left-right coalition, in 1966-69, managed to do some useful things--though in part, perhaps, because the stark imperatives of the cold war, and a divided nation, laid heavy responsibilities on all elected politicians.

But rightly or wrongly, Germany's pundits seem pessimistic about Ms Merkel's ability to hold a broad coalition together--or if she does hang on, to achieve anything of lasting value. Some gleefully point to the defects of the last left-right government: the fact that it often chose easy options over costly ones, and drove disgruntled voters into the arms of extremists or away from parliamentary politics (see page 43). Other gloom-mongers predict the Christian Democrats (CDU) and their Christian Social Union (CSU) partners will agree with the Social Democrats (SPD) only on a bare-bones agenda--while each side concentrates on getting ready for a clear victory in another election.

Yet the new grand coalition needn't be a failure, especially if negotiators, who hold their first serious talks on October 17th, get two things right. One is personnel: if the first grand coalition was a partial success, it was mainly because Karl Schiller, an SPD economics minister, and Franz Josef Strauss, a CSU finance minister, respected each other and did good things together. The second condition for success is a properly reforming policy programme. However, the biggest challenge will come only once the government has been formed: it is that of convincing Germans they need economic reform, and then making them feel better about it.

On the human front, the two camps seem to be able to work together without coming to blows; the party bosses on each side like and understand one other. But the pleasant working relations between the SPD's Franz Muntefering and the centre-right's Edmund Stoiber are a mixed blessing. Between them they might try to neutralise the healthy nettle-grasping of Ms Merkel. Both seem intent on turning her into little more than a moderator; there is talk of watering down the chancellor's role in setting policy.

Look at the government agenda that is emerging, and the signs are even gloomier. The party bosses have already shelved the main elements of Ms Merkel's proposed reform programme: a flat-fee health-care premium to lower non-wage labour costs; further labour-market reforms, such as loosening Germany's strict protections against dismissal; and radical tax reform. Instead, they appear to prefer pussy-footing reforms, little more than a continuation of the Agenda 2010 reform package devised by the outgoing chancellor, Gerhard Schroder: subsidy and other budget cuts to trim the public deficit and conform to euro-zone rules; simplifying the tax system; and constitutional change to disentangle the federal and regional tiers of government.

With its massive majority, the new coalition should be aiming for something bolder. Sorting out the process for taking political decisions is perfectly sensible. But there is a far tougher job to do that is no less urgent: simplifying the country's "financial constitution", an inefficient cobweb of tax-revenue equalisation and joint public spending. And, more important than further labour-market reforms and cutting red tape, the new government needs to deal with the underbelly of Germany Inc: the vast network of often hidden subsidies and protections that keep the services industry, in particular, from becoming more efficient and creating new jobs.

Nerves of steel

To do all that, the new government will need to do what its predecessor stumbled over: to convince Germans that the aim of reform is not to inflict pain, but to restart the economy and generate the funds for badly needed investment in education, technology and utilities. That, in the end, is the only way that Germans can preserve the "social balance" which many hold dear. A grand coalition ought to be well placed to get the message across, assuming it had the vision and boldness to try. Then, Germans might snap out of their depression and come to see globalisation as an opportunity not a threat.

Unfortunately, communication is Ms Merkel's weak spot. An ideal leader would combine her principles with Mr Schroder's slickness. A more realistic hope is that some of Ms Merkel's other qualities will come to the fore. She is a fast learner--and has steelier nerves than her male opponents. If, as many worry, her government ends up paralysed in a year or two, she could and should seek new elections, in the hope of gaining a clear majority. Between now and then, she will need to face down reluctant coalition partners with the determination that has neutralised rivals on the centre-right.

The result could be a pleasant surprise. At the start of the election campaign, The Economist wrote that Germany's economy could soon defy the general prognosis of gloom. Ms Merkel might yet inject some spirit into its politics too.

Editorial argues that the new 'Grand Coalition' in Germany needs to implement reform - and then sell it.

• Primary Source