Facing up to Germany's fears

Europe has engine trouble. Its biggest economy (Germany), largest population (Germany again), and the country where east and west literally meet (yep, Teuton land) is up on blocks, its government stalled by Sunday's inconclusive election.

Reminiscent of Bush-Gore 2000, the near electoral tie between the nation's two leading parties has their two respective leaders each claiming a mandate to form the next government. Unlike in the US, however, their parliamentary system allows them the option to join together in a large coalition, or try some unusual partnerships with smaller parties.

How the political dust will settle, no one yet knows. But the outcome will affect more than Germany's 83 million people.

As Deutschland goes, so goes the European Union. The EU itself is in a crisis over its unwieldy number of member states, its gummed-up bureaucracy, and sluggish economic growth. Many Europeans were counting on strong new leadership in Germany to rev up reforms for itself that would then spread to other EU states. The last thing Europe needs is a muddle in its middle.

Washington, too, must be wondering whether it will continue in a trying relationship with incumbent Chancellor and leader of the Social Democrats, Gerhard Schröder. Or will it have a new dance partner, the Washington-friendlier Angela Merkel, who supported the Iraq war and whose Christian Democratic Union is more in step with US conservatives?

For now, Euro-punditry is roiling with gloomy scenarios of unworkable coalitions in Berlin. Observers worry whether Germany - stuck in an economic funk and struggling with a jobless rate of 11.4 percent - can carry out the difficult economic, labor, and social welfare reforms necessary to get its engine purring again.

This won't be possible unless Germany's political leaders - whichever ones prevail - address the population's fear of significant reform. More than anything, this election registered anxiety about losing the perks of the "social market economy." The new, radical Left Party, made up of ex-communists and disaffected Social Democrats, ran against Mr. Schröder's modest reforms and polled a surprising 8.7 percent. It was his reforms - and the Social Democrats' slew of regional election losses - that prompted this early election in the first place. Meanwhile, Schröder's criticism of Ms. Merkel's party as "radically unsocial" turned many voters away from her more market-oriented platform.

How does one calm fears of shrinking pensions, reduced union bargaining power, or more joblessness? By pointing to successes: Nordic states that retooled labor and business yet still retained generous social services; Eastern European nations whose economies are growing with lower wages while shedding much of the communist social safety net; Brits who went through the labor reforms of the Thatcher era and who enjoy one of the lowest unemployment rates in Europe - and long-standing economic growth.

Germany's politicians must tackle fears of globalization, flexible labor markets, and slimmer social benefits. Only by doing that, can they hope to get their economy - and that of Europe - out of the garage and speeding once more down the autobahn.

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