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Germany

The German Fear of Reform

Germany might be in the middle of a deep economic crisis, but the country's high unemployment and weak growth are probably the best things ever to happen to Angela Merkel's career.

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Can Merkel help Germany get its groove back?

Amid widespread discontent over record joblessness and increasing economic uncertainty in the age of globalization, Merkel, the conservative opposition's candidate to take on Chancellor Gerhard Schröder in early national elections this fall, is hoping to convince Germans she can help the country get back on track.

"We have to become faster and more flexible if we want to compete internationally," Merkel, leader of the Christian Democrats (CDU), said last month in Berlin outlining her upcoming campaign. "We want things to start improving in Germany again."

With the CDU riding high in opinion polls, the 50-year-old Merkel looks set to become both the first woman and the first person from the formerly communist eastern part of the country to lead Germany. But success at the polls would also put her in charge at a time when Europe's largest economy is flagging and average Germans are reluctant to back painful reform measures.

Psychological problems?

"As a rich and well educated country, Germany has all the tools to be a smashing success," said Jeffrey Gedmin, director of the transatlantic think tank the Aspen Institute, in Berlin. "But there are serious structural problems and psychology has become one obstacle to change. Germany is in a bit of a funk."

Schröder erklärt Beweggründe für Vertrauensfrage

German Chancellor Gerhard Schröder

Schröder opted to push Germany's next general election forward by a year after his Social Democratic Party (SPD) was hammered in a key state election last month. The defeat in the party's regional stronghold North Rhine-Westphalia was the latest in a string of losses that Germans have used to punish Schröder for scaling back Germany's generous welfare state and failing to revive the economy.

The government's unpopular measures to cut social benefits while implementing labor market reforms have failed to dent Germany's chronically high unemployment, which currently hovers at 12 percent. The expansion of the European Union last year to include much of Eastern Europe has also heightened fears that the country will lose even more jobs to Germany's low-wage neighbors such as Poland and the Czech Republic.

"I'm not sure (Merkel's) Christian Democrats have the answers to the problems either," said Ralf Kaule, a 47-year-old banker who commutes from Berlin to Hamburg each week because he couldn't find a job in his hometown. "I'm doing relatively okay, I can't complain. But I'm not very optimistic about the future."

Aggravated by unification

Gemeinschaftswerk Aufschwung Ost in Magdeburg

The country's current woes have undoubtedly been aggravated by the challenges arising from German reunification in 1990. Approximately 1.25 trillion euros ($1.57 trillion) have been spent rebuilding what was once communist East Germany over the past 15 years. Despite the massive transfers of aid, the region is still struggling and unemployment is double that in the more prosperous west.

Yet Germany's standard of living remains remarkably high and an extensive social safety net ensures there is virtually none of the abject poverty seen in some industrialized countries such as the United States. However, that security comes at a price the country is finding ever more expensive to maintain.

Though Schröder committed his center-left coalition of Social Democrats and environmentalist Greens to a reform course in 2003, he has been under constant pressure from left-wing members of his own party and angry trade unionists keen to roll back what they see as an effort to gut Germany's welfare state. It is a view shared by many long-time SPD supporters.

"I'm done with the Social Democrats, they're no longer the party of the workers," said Joachim Wolf, an out-of-work mechanic from eastern Berlin. "It's all about what's best for big business these days."

Fear of globalization

Wolf, who spends his days playing cards with friends at a makeshift table in a dreary corner shop, expressed a deep-seated aversion to globalization and fear about what growing international competition might mean for working-class Germans.

Hamburger Hafen

Hamburg's busy harbor

Ironically, Germany probably stands to gain more than most countries from globalization. Despite its myriad problems, it remains the world's leading exporter and foreign demand for high-quality German goods has helped offset the slumping domestic economy.

Jürgen Winkler, a professor of political science at the University of Mainz, said a new of government could help Germans regain confidence in the country's future. "Schröder has been there for seven years, it's probably time for change," he said. "You don't even have to support the CDU to see it could help encourage an atmosphere that things are no longer simply stagnating."

And that could help Merkel push through unpopular measures aimed at sparking job creation, such as raising taxes to lower the deficit, or weakening job protection measures and laws that mandate worker consultation at companies. Though unlikely to rejoice over such policies, many Germans now appear convinced things can't continue as they are. "A lot of people are very disappointed," said the commuting banker, Kaule. "Perhaps we should have started the reforms much earlier."

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