http://www.businessweek.com/stories/2004-04-04/will-schr-der-throw-in-the-towel

Magazine

Will Schr?der Throw In The Towel?


Germany's next national elections aren't scheduled until 2006, but Chancellor Gerhard Schr?der already looks like a lame duck. Only 26% of German voters support Schr?der's Social Democratic Party (SPD), according to the latest polls. Dissidents are threatening to form a splinter party, claiming Schr?der has betrayed socialist principles by cutting taxes for the well-to-do and easing job-protection laws. On the right, the opposition Christian Democratic Union controls the upper house of Parliament, allowing it to force changes in many of Schr?der's initiatives. "These have been damned difficult times," Schr?der grumbled to party officials gathered in Berlin on Mar. 21.

So difficult, in fact, there is speculation that Schr?der is tired of being the nation's punching bag and could even resign. "In the pressure cooker that is Berlin, rumors are swirling that the Chancellor just doesn't feel like it anymore," wrote Berlin daily Die Welt on Mar. 19. Most analysts still consider a Schr?der resignation unlikely, and the official line is that he plans to run for a third term in 2006. "He's a fighter," says Siegmar Mosdorf, a former Deputy Economics Minister in Schr?der's government. A spokesman for Schr?der called speculation about resignation "absurd." But in the past Schr?der has threatened to quit as a way of silencing critics, and one day may make good on that threat.

How might a Schr?der departure play out? The German constitution makes it tough for Schr?der to be removed against his will. But his political fatigue could increase as Germany's economic crunch becomes even more acute. The workforce is shrinking, the number of retirees is growing, and unemployment remains at 10.3%. Schr?der is trapped between economic necessity and disgruntled voters. "He doesn't have much breathing room," says Michael Greven, a University of Hamburg political science professor. A major blow to Schr?der's prestige is likely on June 13, when there will be elections for the European Parliament, the state parliament in Th?ringen, and municipal offices in seven German regions. Polls suggest an SPD debacle.

SEARCH FOR STATURE. If Schr?der were to throw in the towel, his move would touch off a political scramble. The last time a government fell was in 1982, when the centrist Free Democratic Party deserted a coalition with the SPD under Helmut Schmidt and linked with the CDU. That ushered in 16 years of conservative government under Helmut Kohl. Theoretically, the SPD's Green Party partners could bolt and form a government with the CDU. But it's improbable that the environmentalist Greens and socially conservative CDU could find enough common ground to team up.

Instead, the SPD and Greens would try to agree on a replacement for Schr?der if he steps down. The problem is who. Reform-oriented Economics & Labor Minister Wolfgang Clement is one candidate, but he is even more unpopular among the left than Schr?der. The party lacks other figures with broad popular appeal. That and divisions inside the ruling coalition would make for a messy power struggle.

To avoid such an outcome -- sooner or later -- Schr?der beat a tactical retreat on Mar. 21. He handed leadership of the SPD to Franz M?nterfering, a party veteran who leads the SPD delegation in Parliament. Schr?der's gamble is that M?nterfering may be able to do a better job than he has in communicating with the party rank and file -- and serve as a lightning rod for dissidents. Schr?der is also proposing reforms that soothe rather than annoy voters, such as more money for child care. Such moves seem to have temporarily mollified the left.

Half-measures can only work for so long, however. Someday, Schr?der will face a day of reckoning. As Germany's budget pressures grow, he will simply have to seek more unpopular cuts in social services -- or quit and let someone else do the dirty work. By Jack Ewing in Frankfurt


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