A test of Germany's 'Third Way'

A contentious budget presented this week could make or break the German

Germany's Chancellor Gerhard Schrder is in the political fight of his life, dampening what was to be the triumphant return of the country's government to its former capital, Berlin.

Only one week after raising its curtain as the official stage of German politics, the Reichstag, whose torching in 1933 paved the way for Nazi rule, is already the scene of a historic parliamentary debate that will shape 21st century Germany.

"We have tremendous pressure to change in this country," a podium-pounding Mr. Schrder declared there yesterday. "If we don't change, we can expect really harmful consequences."

At the center of the debate is a contentious $252 billion budget plan that aims to reduce a staggering deficit, spur business, and shrink a bloated welfare state.

But this is more than a budget battle. The debate surrounding it will define what direction Germany takes under the traditionally leftist, labor-oriented Social Democratic Party (SPD), which, along with the environmentalist-oriented Greens, swept into power last September after 16 years of conservative rule.

It's also a crucial test of "Third Way" politics, personified by left-of-center leaders such as President Clinton and British Prime Minister Tony Blair. In Germany, Schrder has dubbed the philosophy the "New Middle."

With 12 of the European Union's 15 members, and the US, ruled by left or center-left governments, Schrder's ability in convincing German voters of the policy is widely viewed as a barometer for the success of the still infant brand of politics.

As Europe's largest economy - accounting for one-third of the economic output of the 11 nations that use the euro currency - Germany will influence how governments across the European Union respond to globalization.

Schrder waltzed into power one year ago on a platform promising social justice, the traditional appeal of his party, coupled with business friendliness, a concept only recently embraced by Europe's labor-based parties. But his perceived failure to assert his leadership and define his "New Middle" politics since taking office is cited as one reason behind his party's drubbing in recent state elections.

So far, the results have been disastrous: German voters have ousted three social democratic leaders in four state elections since February. In the one poll the social democrats did not lose outright, in the eastern German state of Brandenburg earlier this month, Schrder's party saw voter support drop by more than 15 percent.

"On one hand, Schrder does not stand for the old social-democratic set of beliefs ... so he does not mobilize the traditional social-democratic voter," says Josef Janning, deputy director of the Applied Policy Institute, an independent think tank in Munich. "On the other hand, he has not yet defined what he actually wants the party to be - what the party should stand for," he says.

Echoing the complaints of many SPD supporters, Ronny Lange, who came out to see Schrder at a political rally in Dresden Wednesday night, says, "The New Middle must be better explained. I can't even begin to understand what he means by that."

Damaged by party infighting

Other Third Way leaders, including Mr. Clinton and Mr. Blair, also have been derided for not defining their policies and have weathered criticism from their parties' left-wing traditionalists. But in Germany's SPD camp, what's been described as "a battle for the party's soul," has been undermining Schrder's authority. Party leftists are charging that the budget cuts crafted by Schrder's finance minister, Hans Eichel, are socially unfair to the poor and middle class.

Citing the SPD's "innovation and justice" platform, Detlev von Larcher, an SPD parliamentarian and leading Schrder critic, says, "People have the feeling that we've fallen short on justice, and are now saying 'When you have not made the political changes you promised, then we can't vote for you anymore.' "

The thrust of the budget cuts are reducing a deficit that has roughly a quarter of government revenues, about $44 billion annually, paying off interest. Schrder allies assert that leaves little money to keep up Germany's social benefits, among the most generous in Europe.

Mr. Eichel has called for $16 billion in budget cuts, part of which will be made by limiting pension increases over the next two years to the rate of inflation. In the hope of making a dent in Germany's stubborn unemployment rate, now at 10.3 percent, the plan also calls for tax cuts for businesses.

Vowing to stay the course

"When it comes to budget consolidation, there is no alternative to gradually reducing social costs and strengthening business," argues Schrder ally Carsten Schneider. But "when someone in the SPD says that is socially unfair, it's no wonder that we lose votes. We don't need opponents when we do it ourselves," he says.

Despite the infighting and string of election defeats, Schrder has vowed to hold his course. With only two more state elections this year - one in Saxony on Sunday and another in Berlin in October, where conservatives are expected to win hands down, Schrder is concentrating on passing the budget and healing this summer's wounds.

"He can only win when he holds his course," says Mr. Schneider. "Only then will he win back his authority and credibility. And one has to accept that one loses the state elections."

(c) Copyright 1999. The Christian Science Publishing Society

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