Vote of No Confidence
By Stefan Theil

Who will rule Germany now? While the politicking continues, the nation's prospects for economic reform seem more uncertain than ever.

Sept. 19, 2005 - Germans of every political stripe were speechless on Sunday night. At the headquarters of her Christian Democrats in Berlin, a visibly shaken Angela Merkel faced her crestfallen supporters. Confounding pollsters' unanimous predictions of a Merkel landslide, German voters changed their minds at the last minute and handed her CDU one of its worst results ever. Still, it was just enough to narrowly beat out her opponent, incumbent chancellor Gerhard Schröder and his Social Democrats (SPD) - so Merkel declared victory. Yet even more stunning was the chancellor's appearance a short time later. Wildly cheered by his followers, a cocksure Schröder said it was he, not Merkel, who would stay in power and rule Germany.

The spectacle of both candidates claiming the chancellorship even after the election is over is part of the worst political muddle in recent German history. Both Merkel's CDU and Schröder's SPD are far from the majority they need to govern. At 35.2 and 34.3 percent, respectively, both parties are near historic lows. Voters flocked to the smaller parties at the margins: the environmentalist Greens, the pro-business Free Democrats, and the communists each got close to 10 percent. Neither Merkel nor Schröder got a mandate to govern with their preferred coalition partner: Merkel with the Free Democrats or Schröder with the Greens. The bottom line: Germans voted Schröder out without voting Merkel in.

The muddle comes after a bitterly fought election campaign. Schröder, who presides over 11 percent unemployment and a stagnating economy, vowed to defend Germany's cherished welfare state against the onslaughts of globalization, painting Merkel as a "cold-hearted" market radical. Merkel, in turn, promised a tough course of pro-market reform that would eventually bring jobs and re-start growth. In the end, Merkel's plans scared off German voters. As she began laying out concrete plans for reform during the campaign - such as cutting back subsidies, reducing worker protections and curbing labor union power - her one-time 20-point lead over Schröder quickly melted away. It didn't help matters that Merkel's own party was divided over her reformist zeal.

Who will run Germany now? That depends on what kind of coalition Merkel or Schröder can negotiate in the coming days and weeks. Schröder on Sunday ruled out governing with the votes of the communists, and the Free Democrats have vowed not to support Schröder. That leaves two possible combinations. In one, the Greens would have to switch from supporting Schröder, as they have in the past, to Merkel's conservative camp. The second, and, according to analysts on Monday, more likely outcome is a so-called "grand coalition" in which Merkel and Schröder's parties govern together - but under whose leadership is still unclear. If Merkel and Schröder stand firm in their claims to be chancellor and coalition negotiations remain deadlocked, Schröder might let himself be elected chancellor with the help of the communists, and then try to rule without a stable majority. Failing that, there'd have to be a new election. Confused? So are Germans. Der Spiegel, a German newsweekly, calls it "anarchy in Germany."

But it's more than the political muddle that makes this election a setback for Germany. For the first time, German voters had a clear choice for and against the kind of reforms the country needs if it is to re-start growth and get more of its citizens working again. Like other reformers to whom she's often compared - Ronald Reagan or Britain's Margaret Thatcher - Merkel wanted a mandate for "more market economy, less government" - a vision a majority of Germans rejected. "Germans do not want reforms, it's as simple as that," a shocked Merkel associate told Newsweek Sunday night. "This election is a disaster." If there's a silver lining, it's that no government can avoid economic reality; after all, it was Schröder who, despite all his promises to defend the welfare state, first steered Germany onto a cautious path of reform. Who will take Germany farther down that path is, after this muddled election, is still anything but clear.

© 2005 Newsweek, Inc.

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This article originally appeared exclusively online at Newsweek International and was reprinted with permission of the author.

This article appeared in the September 22, 2005 AICGS Advisor.