GMF - The German Marshall Fund of the United States - Strengthening Transatlantic Cooperation

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Germans heaved a collective sigh of relief on Monday when they heard that the Christian Democrats and the Social Democrats had finally cut a deal to form a grand coalition government, to be headed by Angela Merkel. Germans do not much like uncertainty, and they certainly do not like it in their politics. After three weeks of wrangling following the inconclusive September 18 poll, it seemed any news would be good news. But just how good is it, and for whom?

The advent of Germany’s first female chancellor is good news for women, who make up half the electorate. Look where you will, in terms of promotion equality in the workplace and work-life-balance, German women lag 10 years behind the rest of Europe and at least 15 years behind the US. Having women in top jobs matters – and this particular promotion is the biggest any German woman has ever achieved.

Ms Merkel’s grand coalition, however, is merely an interregnum arrangement. With luck, it will last two years. Its only historical predecessor in German postwar history lasted all of three years (1966-69), before it crashed – and there was far broader agreement between the two camps 30 years ago than there is now.

Ms Merkel is a canny, cool-headed operator who built a political career on being underestimated, most memorably by her mentor Helmut Kohl, former chancellor, who used to refer to her as “my girl”. She proved her ruthlessness when, at the height of a conservative party financing scandal, she publicly called on Mr Kohl to resign. He did; her career was launched.

However, Ms Merkel has yet to prove she can not only win, but maintain, a victory. Her only previous stint in government was as a colourless minister for women and the environment. Unlike her persuasive predecessor, Gerhard Schröder, she has difficulty connecting to voters, including her own. She has few close friends in her party’s leadership. For these reasons alone, Ms Merkel might yet turn out to be a dead woman walking: a leader beginning the end of her career rather than ending the beginning. Yet Ms Merkel must also lead a potentially explosive coalition. In theory, both camps agree that Mr Schröder’s “Agenda 2010” reform programme should be the point of departure; both publicly insist they do not want to form a “lowest common denominator” coalition.

But what are they likely to be able to agree upon? Reform of Germany’s creaking federalist structures? Yes, because both parties have worked on this together in the parliament’s upper house (the Bundesrat) for years. Greater centralisation and liberalisation might make it easier to shake up Germany’s underperforming universities and schools, and allow police and domestic security services to co-operate in combating terrorism. Healthcare or tax reform? Perhaps.

But on the really crucial issue – reform of Germany’s rigid and restrictive labour market – majorities in both parties oppose the radical changes necessary to crank up the ailing economy. Only a tiny fraction of the newly elected members of the Bundestag, which must convene on October 18 to elect the new government, are entrepreneurs. For most of the others, “liberal” is a four-letter word. Not that Germany will have much freedom of movement in economic affairs. Although it has broken the European Union’s budget deficit limits three years in a row, the European Commission was reluctant to punish the EU’s largest economy. Now, with Berlin set to break its promises of fiscal responsibility for the fourth time, and the ­Commission considering punitive measures, Germany could find itself in a fiscal corset so rigid as to preclude any chance of economic recovery.

On the foreign policy front, the outlook is slightly better – if only because there is little substantive disagreement on most issues between Christian Democrats and Social Democrats. A Chancellor Merkel would not send soldiers to Iraq, granted, but she also would not pose for family photographs with Russia’s President Vladimir Putin. But do not hope for strong or even innovative German leadership in European or transatlantic affairs – nobody will have the energy for that. For there is one more negative force to be reckoned with: the Left party, composed of former East German communists and renegade Social Democrats. They may well split up over their own cultural and ideological disagreements. But they are clearly setting themselves up as spoilers on all fronts. Finally, on the upside, Berlin taxi drivers will stop asking their guests: “Have we got a government yet, have you heard the radio?” At least for the next two years.

The writer is director of the German Marshall Fund’s Berlin office.