Iraq. Stoiber was diplomatic about Germany’s
likely role, Schröder reflected the popular mood
declaring that under no circumstances would
Germany join in any war against Saddam Hussein.
When the elections were held in September,
with the CDU/CSU previously neck-and-neck
with the SPD, both parties polled approximately
the same votes, 38.5 per cent, but with the gains
the Greens made, the SPD/Green coalition had
survived.
The popularity of Schröder was based on weak
foundations. The aura of his robust stand against
participating in the Iraq war could not outlast its
conclusion for long. Fences with the US needed
mending; especially with President Bush who
took Germany’s abandonment of the alliance per-
sonally. But Germany had demonstrated once
again that the people overwhelmingly opposed
any military action beyond its own frontiers. It
was reassuring for the rest of Europe how pacific
the Federal German Republic had become, how
European minded though, thereby opening a gap
with Blair’s more realistic alignment with the US
- but then Britain did not have to live down the
Second World War. Schröder’s headache at home
was how to get Europe’s biggest economy out of
stagnation. The backing of his own party, split
between the more centrists and left, is always
problematical. At least he can count on the
backing of his coalition partner, the Greens. The
parliamentary majority of nine is dangerously
small if some SPD members of parliament choose
to abstain from backing the government. On the
other hand, the small majority ensured more dis-
cipline. The party does not wish to face another
election too soon which it would be likely to lose.
During the previous summer of 2002 Schröder
had assigned to a group of experts the ‘Hartz
Commission’ – Peter Hartz at the time was the
personnel director of Volkswagen – to come up
with recommendations on reform in the eco-
nomy. In the summer of 2003, the party backed
Schröder’s reform plan which abandoned hal-
lowed workers’ rights.
Full unemployment pay would only be paid for
one year instead of two years and eight months
and then lower welfare rates would apply; laying
off workers would be made just slightly easier,
more flexibility in rates of pay would be intro-
duced. None of these changes are earth shattering;
the unique industrial feature of co-determination
by workers and managers, however, was left in
place. Reforms pointed to a new direction of the
social compact of worker–employee relations and
social welfare entitlements provided by the state
for the people. The non-wage labour costs had
exceeded 40 per cent – too high in a competitive
international age, taxation was too steep and even
so the budget deficit exceeded the 3 per cent limit
set by the European Union’s Growth and Stability
Pact. To lower expenditure, health entitlements
would be pruned. Small independent businesses
based on craft skills would also find it a little eas-
ier to establish themselves. There would be no
sharp shock treatment as the very name given to
the reforms ‘Agenda 2010’ revealed.
It is all probably too little too late. German
industry and services will need to find the cre-
ativity in a recovered world market to pull
Germany out of its low growth rate and reduce
unemployment to acceptable levels below 5 per
cent, a reduction that in 2005 could only be
dreamt about. Yet standards of living remain
among the highest in Europe. Germany is not a
country in crisis and government remains stable
and democratic. The neo-Nazis remained on the
fringe rejected by the overwhelming majority of
people. The 2004 Länderelections starkly con-
firmed the continuing east–west split despite the
1.25 trillion euros transfer to build up the east
since 1990. Unemployment and discontent is
high benefiting extreme parties there on the left
and right. A long and painful road of welfare and
labour law reforms lies ahead to make Germany
more competitive.842 WESTERN EUROPE GATHERS STRENGTH: AFTER 1968
Bundestag elections, 2002Percentages Seats
SPD 38.5 251
CDU/CSU 29.5/9.0 190/58
Greens 8.6 55
FDP 7.4 47
PDS 4.0 2
Others 3.0 –