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Drozdiak: Indecisive Election Results Portend 'Great Instability' for Germany

Interviewer: Bernard Gwertzman, Consulting Editor
Interviewee: William Drozdiak, President, American Council on Germany
September 18, 2005

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William Drozdiak, president of the American Council on Germany, who earlier called Sunday’s parliamentary elections the “most important” in years, says the very close outcome, with neither of the two major parties able to easily command a majority, portends “great instability.”

“We are entering a phase of great instability in Germany, which is far and away the most important economy in Europe and the biggest country, with 82 million people,” Drozdiak says. “It means Germany will not be able to lead the European Union out of its recent crisis over the failed constitution.”

He was interviewed by Bernard Gwertzman, consulting editor for cfr.org, on September 18, 2005.

As we speak on Sunday night, the initial results from the German parliamentary elections are in, and it looks like a setback for the Christian Democratic Union (CDU) led by Angela Merkel, which had been heavily favored to unseat the ruling Social Democrats, doesn’t it?

Absolutely. This is a big setback for the CDU. They had polled consistently above 40 percent all during the campaign. But it looks now as if the CDU will have about 35.2 percent. Chancellor Gerhard Schroeder’s ruling Social Democratic Party (SPD) had been closing the gap the last two weeks partly as a result of his strong performance in a couple of televised debates, but also because of his pitch that his reforms were more sensitive and less painful than Merkel’s.

I also think, in a way, the images of Hurricane Katrina may have played a psychological factor. Schroeder raised this in the second debate when he said, “Look at these catastrophic images. It shows what happens when you have an insensitive or lack a strong government in society. This is what we want to maintain under SPD leadership.” All of that played into his comeback in the last few days. At one point, as recently as three weeks ago, the SPD was only getting 28 percent. Currently, it looks like they’ll get 34.3 percent. This is about 4 percent less than they polled in Germany’s last election in 2002, but it is significantly better than [their numbers] a few weeks ago.

Can we predict now who will be the next chancellor, or is it going to require a lot of political bargaining?

I think there will be a lot of horse trading. The likelihood is the president of Germany, Horst Kohler, will probably give Merkel the first shot at trying to set up a stable government. She will probably negotiate with the SPD to see if they can come up with a common legislative platform. If that works, you would have the largest mainstream parties setting up a “grand coalition,” which has happened once before in German postwar history, from 1966 to 1969. That paved the way for the Social Democrats to have a long period in power with Willy Brandt [chancellor from 1969-1974] and then Helmut Schmidt [1974-1982]. But what will happen now is that, because Merkel has been stung so badly, she would go into negotiations in a very weak position.

One of the first comments by Schroeder tonight was that there can’t be any grand coalition under a Chancellor Merkel. So it looks like he is going to play hardball.

So he may hold out against the coalition with her unless he remains chancellor, right?

Yes. But since she has the biggest party, I don’t think her party will let her do that. There are other alternatives. She could explore a coalition with the Free Democrats (FDP), which got about 9.8 percent, and the Green Party, which had been ruling with the SPD and got about 8 percent. That would give such a coalition more than a 50 percent majority. But there are sharp differences between the FDP and the Greens, notably over nuclear power plants. The Greens want to phase them out, and the FDP wants to keep them going to ensure enough energy supplies.

Merkel has an alliance with the Free Democrats, right?

Yes. That was the hope of the CDU and the FDP. They hoped that together they would have more than 50 percent. But they have fallen short and will have to explore other options. The other possibilities are that the SPD might try to form a coalition with the FDP and the Greens, but the FDP right now is saying they do not want to go into government with the SPD. Or the Social Democrats could think about going with the Greens and the New Left Party, the former communists, but this is something Schroeder himself has excluded, saying his nemesis, the SPD’s former finance minister Oskar Lafontaine, is someone he does not want to govern with.

What do the SPD and the CDU have in common on reforms?

Some people could say the crisis is so serious in Germany that a government of national unity or government of national emergency is the only way to push through far-reaching reforms. So maybe there is a way moderates in the SPD—particularly if Schroeder does not play a role—may say the crisis is so serious that the two biggest parties have to band together and agree on necessary reforms that can at least push the ball further down the road over the next couple of years and see how this plays out. Maybe there will have to be early elections again in a couple of years. It will be a very difficult process to negotiate, and I would bet that you will see a serious hit on the German stock markets because there will be a loss of confidence in reforms.

If the parties fail to agree, can the president ask one of the parties to form a minority government?

Yes. He can ask the SPD or the CDU to do so, but that would be inherently instable and would portend elections fairly soon, in a year or two. We are entering a phase of great instability in Germany, which is far and away the most important economy in Europe and the biggest country, with 82 million people. It means Germany will not be able to lead the European Union out of its recent crisis over the failed constitution.

What caused the upsurge for the SPD? Was it just that Merkel was a poor campaigner?

She did OK in the debates. But she is very lackluster. She ran a dull campaign. She is a colorless personality. She did not convey a lot of conviction on the stump. She looked like she was faltering and was very hesitant when she got involved in a controversy over the flat tax.

She did very poorly in former East Germany, right?

Yes. It is a bit strange. You would think they would feel some pride that a woman from former East Germany had risen so far in the ranks of a major party. But she got very little sympathy in the east, where there is great unemployment and the communists are still strong.

So the bottom line is that things are very uncertain.

Yes, it is going to be a protracted period of instability in which first Merkel and perhaps Schroeder will explore the possibilities of coalitions. Nothing can be excluded. But there is no unanimity on the reforms that are needed.

Explain what you mean by “reforms.” These are changes in labor laws?

Right. Primarily what is hurting Germany is that more than 5 million are unemployed, or close to 12 percent of the workforce. This is because jobs are being shed at an alarming rate. The combination of taxes and welfare benefits means that German workers have to pay [their workers] more than $30 an hour. In the United States, by comparison, it is $17 an hour. In a country like Poland or the Czech Republic, the wages are about $5 to $6 an hour.

What Merkel wanted to do was make it easier to fire and hire workers, to reduce the payroll taxes. But this resonated poorly with many Germans who saw this as a way of dismantling their cherished welfare state.

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