Wednesday, 21 February 2007

No Sign of Thatcher Yet...

Just over a year ago, after countless days of rumours, speculation, back room deals and shady compromises, Germany finally had a new government. The Social Democrats – roughly the equivalent of Labour - would form a government with Angela Merkel's Christian Democrats, a traditionally conservative party they had derided just weeks before as radical capitalists intent on destroying Germany's much loved social model. This wasn't like Tony Blair bedding down with David Cameron (probably the two most centrist men in our parties); though he German parties have converged to a certain extent there's still a much large gulf than there is in Britain. Luckily the two parties shed some of their more controversial figures, Schroder bid farewell to his Berlin office, and they began tinkering together to form a consensual legislative program.

Many were sceptical, but nevertheless it happened. Germany had its first female chancellor, and, what's more, she was a pastor's-daughter from the east. The right-wing press, peremptorily licking it's lips at the election of a woman some thought would be Germany's Thatcher, predicted that Germany would change for the better; even the Guardian said that Merkel probably deserved to win. George Bush was so happy that just days after her election he walked up to her at a summit, ape-like as ever, and clasped her on the back – only to be rebuffed by the surprised chancellor. But Merkel was never going to be a Thatcher, no matter how much the Mail, or indeed George Bush, liked to delude itself.

I was in Berlin just prior to the election and many Germans were a bit baffled by what was going on. Schroeder's unpopularity – much like Blair's in Britain – was caused, primarily, by his arrogance and apparent untrustworthiness. At the same time though, they weren't completely sure they wanted to boot out the man who'd kept them out of Iraq and instead usher in a politician who still hadn't accepted that Bush's adventure was an utter disaster. The Germans are a lot more fond of their welfare state than many Britons; and whilst Schroeder was a committed social democrat Merkel had shady plans for cutting taxes.

But how has Merkel actually faired in this climate of expectation, ambivalence and uncertainty? Not too badly it has to be said. Just days after coming to the helm Merkel paid George Bush a visit in the U.S. The Germans, like many of the British public, were horrified by Bush's pugnacious foreign policy – and Schroeder calmly rode this wave for quite some time. So Merkel started boldy – and to her credit she pulled it off. The U.S could expect Germany's support we were told, but Merkel would be no poodle. Indeed, one German newspaper joked that she would be a 'Leitwolf' (leader of the pack) rather than the 'Pudel' played by Blair. Amongst the issues which the pair discussed was Guantanamo Bay: Merkel demanded that it be closed immediately. Coupling criticism with friendly relations seems a much sounder approach to diplomatic relations than Schroeder's aggressive approach.

Just this month Merkel's position as an important world leader has once again been brought to the surface: Merkel didn't mince her words with Putin either. At a summit in Russia she informed Mr Putin that he needed to improve communication with Western Europe; events like the recent energy delivery crisis (Putin shut off oil to Belaurus) and Germany felt some effects.) Will such comments affect any change? Probably not, but they do show that Merkel -and indeed the German government- won't be steamrollered by Putin as they were under Schroeder (the pair set up a direct oil pipeline bypassing most of Eastern Europe in the process.) And they'll resurface soon: in March Merkel is set to release a plan for suring up energy supply to the E.U; doing this without stepping on Mr Putin's already hypersensitive toes will be a challenge of epic proportions.

So Merkel seems to have delivered on foreign policy, but how has she faired domestically? Despite flirting with plans such as a flat tax during her election campaign (and indeed being keen on forming a coalition with the F.D.P (right-wing Liberals) – a party who advocated cutting taxes for the rich and whose leader branded trade unions 'the real plague of Germany'), Merkel has raised taxes since coming to power. Those earning over 250,000 Euros per year must now pay an extra 3% tax – which takes their total income tax to 45%. This measure – one which will have a tiny effect on the incomes of the people it will effect is entirely to be admired. V.A.T has been increased too- a less socially just move. Expect to see some showdowns over how domestic spending is distributed – especially at a time when things such as subsidies for first time homebuyers are up for discussion.

Has this had any tangible effect as of yet? Possibly: it has enabled business tax to be relaxed slightly and thus encouraged economic investment. Unemployment has begun to fall and the economy shows signs of re-invigoration; but many Germans remain unconvinced and refer to a 'Merkel Effekt' (the idea that the economy has been stimulated by a fresh presence rather than any governmental measure) and are unwilling to come to any snappy conclusions. Merkel has now emerged from her initial honeymoon period, so expect some damning criticism to surface in the near future.

Merkel is still a fairly unknown entity; but this year affords an opportunity to find out what lies beneath. As president of the E.U Merkel faces the unenviable task of reviving the badly-bruised constitution, as well as trying to thrash out deals on global warming and energy. Her iffy stance on Turkish accession may cause problems; it may not. In June she is due to unveil plans aimed at revamping the failed consitutional treaty. The prominent leftwing blog has made some fairly apocalyptic predictions for Merkel's future. Thankfully for Germany the S.P.D harness has ensured that she will never be a Thatcher, but whatever happens this year will be a big one for Angela Merkel.

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