By Jonathan Steele (THE GUARDIAN, 12/05/06):
Barely six months in office and Germany's first woman chancellor is not only considerably more popular in her own country than when she was elected; she will also soon become Europe's elder statesperson. With Blair and Chirac in lame-duck decline, by the time Angela Merkel takes over the EU presidency in January she will command more authority than the leaders of the continent's other big states.It is an amazing perspective for someone who looked close to breakdown on election night after throwing away a commanding poll lead and snatching victory by only four seats. Her party's male grandees, who always felt she was an upstart from the east, were grasping their daggers. But Merkel toughed it out, formed a coalition with the defeated Social Democrats and, with a 72% popularity rating, now enjoys the best score of any chancellor for half a century.
Her surge in support rests on a modest turnaround in the economy, which is set to grow by just under 2% this year (thanks to international factors rather than any measures she has taken), as well as on the contrast with her predecessor Gerhard Schröder. Her low-key straight-talking sounds good after his confrontational arrogance - which he compounded within three weeks of losing power by rushing to join the board of the Russian energy giant Gazprom. Ask Social Democrat MPs why they think he did it and the answer varies from a snort to a sigh. No one defends him.
In Italy, Romano Prodi has just won with a margin as thin as Merkel's. He has no chance, or wish, to form a grand coalition with his opponents, unlike Merkel, who now has a vast majority in the Bundestag. Everyone assumes she will be in power for four years. The doubts centre on what this allegedly strong government will achieve and whether it has already started to drift. Commentators argue over which party has made the most concessions.
Some Christian Democrat leaders are angry that Merkel wants to expand an equal-rights bill to outlaw discrimination by gender, age and religion rather than only by ethnic origin. On the other flank, the Social Democrats who fiercely campaigned against Merkel's plan to raise VAT next year now go along with it, even though she is raising it by three percentage points instead of the two percent she promised.
But the aim of using the extra revenue to lower employers' social-insurance contributions and to promote job creation is stalling. The government plans to keep the tax money partly to finance massive reforms in Germany's creaking health system. If Britain's NHS is in simmering revolt, in Germany thousands of doctors are out on strike.
The government also wants the higher VAT income so as to cut Germany's budget deficit and bring it within the EU's required limit of 3% of gross domestic product. "It's not right for us to violate the stability pact for the third, fourth, fifth time because we don't meet our own obligations," Merkel said in typically stern style yesterday in what was her government's first declaration on Europe.
Even at the planned level of 19%, Germany's VAT rate will be well below the 25% rate in Denmark and Sweden. Germany used to pride itself on the "Rhineland model" of consensual employer/ union relations. "Now we have to follow the Scandinavian model," says Gert Weisskirchen, the Social Democrats' foreign affairs spokesman in the Bundestag. This would mean high direct taxes on consumers to finance lower indirect ones on employers who hire new workers.
Merkel did not go that far yesterday. For her the current priority is to have more VAT so as to show she can put a lid on budget deficits like a good European. In the same spirit, she refused yesterday to say that the European constitution was dead, in spite of its rejection in France and the Netherlands last year. "We absolutely need it," she insisted.
Merkel's trademark line throughout her career has been to "advance with small steps". She is enough of a realist to know there is no chance of redrafting the constitution before next spring's elections in France and the Netherlands.
Jose Manuel Barroso, the European commission president, has proposed that EU leaders sign a declaration of intent at next year's 50th anniversary of the Treaty of Rome, which launched the Common Market. This would get strong support in Germany where the Bundestag's corridors are abuzz with speculation about mechanisms to implement parts of the constitution. Jürgen Klimke, of the Christian Democrats, talks of a "shortened constitution" or "a common charter like the Ten Commandments", which would stress Europe's identity, and institutional changes such as the creation of a European foreign minister.
More European than Schröder, Merkel also intends to be a better Atlanticist. After Schröder's close friendship with Putin and his opposition to the US invasion of Iraq, Merkel is back on track with the Bush administration. Her foreign minister has called for direct talks between Iran and the United States, but the chancellor did not make the same point publicly during her trip to Washington last week, apparently not wanting to embarrass Bush.
It was already her second visit to the White House as chancellor. So friendly is their relationship that the US president quickly accepted her invitation to her Stralsund constituency in eastern Germany on his way to the G8 summit in Russia. Merkel's aim is to show him life in areas that were once under communist rule.
It could backfire. Bush's visit to Mainz last year was a fiasco, with tiny crowds and the city under lockdown because of angry protests. The Left party - Germany's new and still uneasy coalition of western trade unionists and eastern socialists - which is a junior partner in Stralsund's regional government, wants to promote anti-Bush demonstrations that are at least as good as, if not better than, those in Mainz.
In the Bundestag elections the Left party won more seats than Germany's Greens. Its MPs plan to turn what was a last-minute poll alliance into a full-scale new party next year so as to escape their eastern image. Having the Social Democrats inside a grand ruling coalition gives the Left party some hope of becoming Germany's main opposition. That seems remote. No one expects the SPD and the CDU to stay together for more than one term. The question for the 2009 election will be whether each tries to take credit for a government that has made real progress or casts blame for one that dithered and failed.