World Policy Journal: The Winter of Germany's Discontent

World Policy Journal
Volume XIX, No 4, Winter 2002/03

The Winter of Germany's Discontent
Martin Walker^*

An old saying in Central Europe holds that in Vienna the situation is always hopeless but never serious, while in Berlin it is always serious but never hopeless. These days it seems that the German chancellor is always embattled but always survives, whereas few can really even name the Austrian chancellor, even when the news is positive– as in the one-sided electoral victory last November of Austria's centrists, resulting in the virtual collapse of xenophobic nationalists. In Berlin, by contrast, a narrow electoral victory by Chancellor Gerhard Schroeder was followed by a mini-crisis in relations with Washington, and a domestic uproar over the chancellor's proposals to hike still higher taxes in a country mired in persistent stagnation. However serious these situations, they did not yet seem hopeless for a left-of-center Social Democrat of Clintonian tactical skill. Schroeder may even– just–be able to have it both ways in his troubled relations with the Bush administration: keep an independent course on any war with Iraq, while narrowing the breach caused by his campaign warnings about American "adventurism."

The problem is that Schroeder is a better tactician than strategist, as he confirmed last September in winning a second term for his Social Democratic–Green coalition. Running on a wretched economic record, he faced clear defeat, even while most voters and commentators understood that there was little a chancellor or a modern government could do against a global lurch toward recession. But the sudden devastation of the cities along the banks of the river Elbe in August showed Schroeder at his telegenic best, dashing to the scene, demonstrating his personal concern and empathy, offering comfort and promises of government aid and cash. From a desperate 8–10 point deficit in the opinion polls, he narrowed the gap to just 4–5 points. Then came what one Schroeder adviser described privately as "the miracle," the speech of Vice President Dick Cheney to the Veterans of Foreign Wars on August 26. Cheney affirmed that the Bush administration was prepared to launch a unilateral preemptive military attack upon Iraq, in the belief that neither of the Cold War strategies of containment or deterrence could prevail against such a foe. "Old doctrines of security do not apply," Cheney argued. "Time is not on our side."

The speech made a considerable stir in the United States. In Europe in general, and in Germany in particular, its effect was devastating, amplified by a media that had already portrayed the Bush administration as contemptuous of its allies. It was delivered the day after the first television debate between Schroeder and his conservative Christian Democratic opponent, Bavarian premier Edmund Stoiber. Iraq had been a relatively minor issue. Most press reports suggested that Stoiber had been impressive, that his attacks on Schroeder's economic stewardship had hit home, and that Schroeder had lost the debate. In this context, Schroeder found in the aggressive Cheney speech the occasion to relaunch his campaign, and above all to woo back his disaffected left-wing and pacifist supporters. Just as he found a crisis where he could make a difference in the floods, suddenly Schroeder was offered an opportunity to make a difference as an international statesman. He called a press conference in which he said Cheney's speech was "a mistake," and then said in a television interview that it was "wrong of Washington to change the original goal" of trying to get the United Nations weapons inspectors back into Iraq. On the same day, his foreign minister, Joschka Fischer, of the Green Party, told Deutschlandfunk Radio that a preemptive U.S. strike could lead to a new order in the Middle East. "There is a big question as to whether this consequence has been thought through and discussed in the U.S."

There was a clear element of political calculation in Schroeder's increasingly critical remarks of the Bush administration's policies, spurred by his political advisers who argued that he could win votes from eastern Germany and the openly anti-American and pacifist PDS party, the somewhat reformed heirs of the old East German Communists. But there is no doubt that Schroeder believed what he was saying about Iraq. On March 13, six months before the election, he told a group of German intellectuals, in an informal conversation at the Chancellery, that Germany would only back U.S. military action against Iraq under a United Nations mandate. That was also the occasion when Schroeder said that even if war broke out, he would keep the modest German unit of six "Fuchs" nuclear, biological, and chemical (NBC) reconnaissance tanks and 52 soldiers stationed in Kuwait. "To withdraw them would be to set back German-American relations for the next 30 years," he argued.

Schroeder first used the derisive term military "adventure" on August 4, long before the issue was prominent in the election campaign. By then, he had begun to notice that his antiwar arguments were becoming highly effective applause lines. On August 6, the Berlin-based Forsa Institute for Opinion Research released an opinion poll in which 84 percent of Germans rejected the idea of their country participating in a conflict in Iraq, with only 13 percent supporting it.

Schroeder, the first German leader since 1945 to have deployed his country's troops abroad, seemed an unlikely candidate to be the standard bearer of the peace movement. Since his 1998 election campaign, he had vowed to make Germany "a normal nation" in global terms, able to deploy troops on peacekeeping missions and to act as freely on the world stage as Britain or France. Breaching the long taboo in postwar Germany against military action was politically costly. In the autumn of 2001, Schroeder had to resort to an unprecedented and risky vote of confidence to force his reluctant pacifist Bundestag members to swallow the dispatch of German special forces to Afghanistan.

In 1999, he sent German warplanes to join the operations against Serbia, and German troops to Kosovo, and later to Macedonia. Having succeeded in cases where the United States wanted German support, Schroeder might have expected some more latitude from Washington when he felt the cause was dubious. Nor did Schroeder feel isolated. In the weeks before President Bush's appearance at the United Nations General Assembly on September 12, there were many American voices urging Bush to work with the United Nations and his allies, rather than invade Iraq unilaterally. The three Democrats best known in Europe, Bill Clinton, Al Gore, and Sen. Edward Kennedy, all gave speeches suggesting a multilateral course, a view echoed by Brent Scowcroft and James Baker, stalwarts of the first Bush administration.

Schroeder vs. Bush

Iraq and relations with the United States had become the most urgent election issue by the time of the second televised debate between Schroeder and Stoiber on September 8. Stoiber challenged Schroeder for failing to talk to the White House about his objections, stressing that previous Social Democratic chancellors like Willy Brandt would never have put the American alliance at risk in such a way. But Stoiber's own reading of the opinion polls and sense of the antiwar mood of the German electorate meant that he too refused to endorse Bush's policies, adding that he might even refuse the Americans the use of German air bases. His hesitancy, contrasted with Schroeder's clear antiwar stand, meant that Stoiber was widely seen to have lost the second debate.

The political atmosphere, in the final days of an election campaign with Schroeder steadily overhauling Stoiber in the opinion polls, was tense and heated. On September 20, two days before Germans went to the polls, the White House released Bush's new national security doctrine, which reinforced German doubts about American leadership. This coincided with another drama. Justice Minister Herta Däubler-Gmelin (incautiously assuming no reporters were present) told a meeting of trade union activists that Bush was using the threat of war to distract attention from domestic troubles, a tactic Germans might remember from "Nazi Adolf." This was reported in the press as likening Bush to Adolf Hitler, which understandably provoked outrage in the White House, and ensured that Bush sent no congratulatory telegram when Schroeder finally won reelection. It also led National Security Adviser Condoleezza Rice to say that German-American relations had been "poisoned," and inspired Defense Secretary Donald Rumsfeld to snub the outstretched hand of his German counterpart Peter Struck at a postelection NATO ministerial meeting in Warsaw. (After the election, Däubler-Gmelin lost her post.)

The breach was still unhealed in the final days of October, when Foreign Minister Fischer flew to Washington for what was visibly a token 30-minute meeting with Secretary of State Colin Powell. Unlike previous visits, he was not asked to call on Condoleezza Rice at the White House, even though Fischer had always been careful during the election campaign to say that he could not envisage supporting a U.S. attack on Iraq "under present circumstances." Both Fischer and Powell were at pains to say the breach would eventually be repaired, building on some intense behind-the-scenes diplomacy by the German ambassador in Washington, Wolfgang Isschinger. Schroeder and Fischer also responded to a British suggestion that the Bush administration would strongly appreciate German support for Turkey's hopes of joining the European Union. As a loyal NATO ally, whose strategic location and air bases made it an indispensable partner for any military action against Iraq, Turkey was of particular concern to the Pentagon. Germany accordingly said it would help, and on the eve of the EU summit in Copenhagen in December, Schroeder agreed with French president Jacques Chirac that Turkey would be given a conditional date (later ratified as December 2004 by the full EU) to open formal accession talks.

Despite the brevity of Fischer's Washington talks, and some very tough words in private from Powell who noted that President Bush had been personally affronted, the breach began slowly to heal. Fischer noted that Germany's quarrel with the Bush administration over Iraq was based on fear of catastrophe in the Middle East once force was used, not on anti-Americanism. In a subsequent meeting with the press, Fischer likened the dispute to a family quarrel. "Sometimes you have to live with differences in the family," he said. "It is not anti-Americanism if we disagree on an issue," Fischer said.

Powell was cautiously emollient in public. "I would say that we are two friends, two allies that occasionally find themselves with areas of disagreement and some rough spots," the secretary of state told a press conference after their meeting. "We have a problem and we'll get over that problem for the simple reason that Germany and the United States are two nations that are bound together by common values, common beliefs, and democracy and all the other things that have kept us together as strong partners for the last half-century." What he did not say was that he and National Security Adviser Rice had agreed that the most serious breach in U.S.-German relations since the 1940s contained a silver lining. The Bush administration could now reasonably ask a very great deal from Berlin, so long as it did not ask for Chancellor Schroeder's humiliation.

In effect, by agreeing that Schroeder could not now take part in a military mission, the Americans might request almost any other concession, drawing on an open account. The one restraint upon American demands was that notice had clearly been given that in making Germany "a normal nation," capable of deploying troops abroad, Schroeder had also made Germany a more independent actor on the world stage. The German-American alliance would remain at the heart of NATO, and NATO and the European Union would remain the twin institutions through which Germany would engage with its neighbors and the world. But that did not mean that Berlin would support the United States in all circumstances. Berlin was prepared to stand on the principle that NATO was an alliance of free and independent democracies, not client states or satellites, and the United States should remember that.

The Real Challenge

The real challenge for Gerhard Schroeder is not mending relations with Washington but honoring his pledge to lift the German economy from its long and demoralizing slump. Germany on the surface appears to be one of the world's most successful countries. There is almost no visible poverty. The elderly, the sick, and the unemployed all benefit from one of the world's most generous welfare states. New Mercedes and BMWs fill the autobahns, even in the former East Germany, while bicycle lanes have been built in almost every town and environmentally friendly windmills spin from every hilltop. The country enjoys one of the lowest crime rates in Europe; with a prison population of just under 75,000, it has an incarceration rate, in proportional terms, about one-tenth the level in the United States.

Nowhere else on earth is culture so generously subsidized by the state. Provincial capitals boast world-class symphony orchestras, ballet and opera companies. University education is free and technically minded school-leavers expect apprenticeships in an industrial sector whose reputation for high workmanship and higher wages is unrivaled. Germans buy more books and newspapers than almost any other people on earth, and the media have to a striking extent escaped the "dumbing down" process that has occurred in so many other countries. Towns are clean and well-kept, with excellent public transport systems. Germany looks and feels like a prosperous, cultivated, and decent society, a social democracy that works.

But Germany went gloomily into this fall's election campaign with its economy slumping into stagnation again and the number of unemployed rising above 4 million. The contrast is cruel between the high expectations of a united Germany after the fall of Berlin Wall in 1989, and the sluggish reality of today. Despite the injection of $1 trillion in aid, subsidies, and welfare payments into the former East Germany over the past 12 years, the east and west remain very different countries. Last month, Germany's Federal Statistics Office published a survey of emigration to the west from the richest and most modernized part of the east, the state of Saxony. It found that about 1,500 emigrants were leaving weekly, most of them young people aged 18–30, with above-average qualifications. This is the same level of emigration that East Germany was experiencing in 1961, a brain and youth drain that provoked Walter Ulbricht's Communist regime to build the Berlin Wall to block the flow. The price of the effort to reunite its two parts has so drained and weakened what remains the richest and most populous country in Europe that the continent's traditional locomotive has run out of steam.

This somber assessment is widespread. In a month of travel and interviews around Germany, I heard the same broad sentiments expressed by young politicians in Berlin, by bankers in Frankfurt, by media professionals in Hamburg, by filmmakers in Cologne, by students in Heidelberg, and by unemployed youngsters in Dresden. This may simply be yet another manifestation of German angst, a tendency to doom and gloom that marked the national culture for centuries before Adolf Hitler gave it such penetrating focus. But rather than the traditional despair about the general human condition, this angst is tightly focused on the structural problems of the German state.

The venerable weekly Die Zeit suggests that "a barricaded society has developed, which hinders almost any modernization, strangles any movement." Former chancellor Helmut Schmidt complains that "many politicians are short of courage." Unlike the Britain of the 1970s, before the brusque and invigorating arrival of Margaret Thatcher, the dominant theme in today's Germany is not one of decline, although there is a relative decline against faster-growing and nimbler countries like Britain, Spain, or Finland. Instead, the real concern is for stagnation, for a society stuck in a depressing rut and controlled by a political system that cannot adapt, even though everything seems to be getting worse at once.

The public health insurance system is technically bankrupt. The German education system, once a source of pride, is in real trouble. German high school students performed poorly this year in an international comparative test of 265,000 15-year-olds in 32 countries organized by the Organization for Economic Cooperation and Development, ranking twenty-fifth in overall reading, mathematics, and scientific literacy. The universities are overcrowded and under-funded. Professor Gunther Hellmann of Frankfurt's Goethe University reckons that up to a third of the students are simply disguised unemployed, studying in name only.

All young Germans who pass their school-leaving Abitur exam are entitled to a free university education, and with few jobs available more and more of them are taking up the entitlement. Professor Hellmann has 5,000 students in his faculty of politics and international relations, twice the number of 15 years ago, but with the same number of professors (30). At the same time, German industry is offering fewer and fewer of the celebrated industrial apprenticeships credited with underpinning Germany's high reputation for workmanship. When Chancellor Schroeder wrote to the Industrial Association to complain, director Ludwig Georg Braun replied that the education level of many graduates is "poor.... Many graduates can't fill complicated positions."

Underlying these discontents is a deep worry about the future, a conviction that Germany simply cannot go on like this, provoked by some sobering demographic trends. Low birth rates and rising life expectancy have combined to make the current social system unsustainable. There are too few Germans of working age to finance pensions. This development has been under way for many years but has become far more serious in the last decade. In 1990, German women had an average of 1.45 children each, a figure already well below the replacement rate of 2.1. (American women in 2001 had on average 2.1 children.) By 2000, according to the European Union's official statistics body, Eurostat, the average number of children had dropped to 1.34 for every woman. And births dropped last year by another 4 percent.

"If you want a sign that things are coming to a head, look at the travel figures," suggests Ulrich Schroeder, a Deutsche Bank "We have long had a rule of thumb that the very last area where Germans would ever economize was in their holidays abroad. This year for the first time since we began keeping records, German spending on foreign travel fell. We are tightening our belts. People fear that we are ceasing to be a rich country."

The "Blocked Society"

One of the few items of close agreement in the election campaign between Gerhard Schroeder and his conservative challenger was the need for constitutional reform. They each sought to reduce the power of the Bundesrat, the upper house in the parliament, to veto laws passed by the Bundestag, the elected chamber. The Bundesrat is composed of appointed representatives of the Lander, the individual states of the federal republic.

With 16 such states, and 4 years between elections, there are usually 4 state elections each year. A change of government in any one of them can change the party majority in the upper house, and often does. Within a year of taking office, Gerhard Schroeder found himself facing a hostile upper house blocking his promises of reform. His predecessor, Chancellor Helmut Kohl, had faced the same problem. Edmund Stoiber fought his election campaign with the conservative premier of the state of Hesse, Roland Koch, looking over his shoulder. Koch faces reelection early next year and was nervous of Stoiber taking bold positions that could help defeat Koch's Christian Democrats in Hesse. Stoiber was equally worried. Losing Hesse would mean losing a majority in the upper house.

"Is Germany, with its cumbersome and complicated decision-making structures, still fit for Europe? The Spaniards, the Dutch, the Swedes, the British take decisions much more quickly than we do," Stoiber told Stern magazine in a preelection interview. "Our federalism has developed negatively. I want the Bundestag to be able to act in significantly more areas without approval from the Bundesrat."

This division of power between Bundestag and Bundesrat is but one aspect of what Germans call "the blocked society," a complex constitutional structure of checks and balances in which serious reform can be very difficult for a government to achieve. The Lander have very wide powers, including veto rights over more than half of all federal legislation, and run their own budgets, schools, police, industrial strategies, banking systems, and regional planning. The federal government has no control over their spending. Germany is currently a whisker away from breaching the Stability Pact of the European Union, which requires that countries using the new euro currency keep budget deficits below 3 percent of GDP. Breaching this rule risks fines of up to 0.5 percent of GDP–some $10 billion in Germany's case. But close to half of Germany's current deficit, according to Daniel Gros, director of the Center for European Policy Studies in Brussels, is the result of the Lander failing to curb their spending, and there is little the Berlin government can do about it. The Lander governments retort that this is not their fault: they are simply cutting the taxes and paying for the services that the Bundesrat has required. Federal and state governments each find it useful to blame the other; the result is more blockage and more frustration.

It is also very difficult for either of the two main parties, the left-of-center Social Democrats (SPD) or the conservative Christian Democrats (CDU) to win a clear majority in the Bundestag. They almost always depend upon coalition allies, and this inevitably blurs their legislative programs. The Schroeder government depends on the Green Party, which required a commitment to phase out nuclear power. The previous conservative governments under Helmut Kohl depended on the Free Democrats (FDP), a liberal party that has recently become classically liberal–that is, free market–in its economic policies. The small parties, and these days they include the reformed Communists of East Germany, now called the Democratic Socialists (PDS), play a much larger role than their modest single-digit share of the national vote would warrant because of the system of proportional representation in voting. Any party that can muster 5 percent of the national vote gets a privileged status, including extra seats in the Bundestag and public funds for party work.

Thanks to the impeccably democratic and decentralized constitutional structure bequeathed to West Germany (and now to united Germany) by its American and British conquerors after 1945, German governments are intended to be weak and civil society is intended to be strong. Governments are required to compromise and to consult–with the individual states, the unions, the employers' organizations, and so on. Germany's public television corporations, for example, are required to have representatives of parents' associations, trade unions, churches, and other civic bodies on their boards. This also holds true in the private sector. Trade unions similarly have a strong legal position under German law. Not only is it difficult to fire employees, but unions have a legal right to engage in constant dialog with companies under the system of "Mitbestimmung" (a word that means something between consultation and joint decision), and unions also have seats on company boards.

"I have been urging the case for fundamental reform of our socioeconomic model for twenty years," sighs Norbert Walter, chief economist of Deutsche Bank, Germany's biggest. "I thought unification would have provided a turning point. Instead, it turned out to be a costly and disappointing distraction. For those who had looked into the German welfare system and its instability before the Wall came down, it was obvious that the German model–with its generous welfare, could no longer be sustained. After unification, our labor costs also increased considerably. Germany has now had the lowest economic growth in Europe for the past seven years. We have to reform our labor laws, our unemployment system, our health services, our national wage bargaining system, and the way we fund our pensions. Everybody knows this. And yet with our political system, it is very difficult to do."

The Sick Man of Europe

Two years ago, Otmar Issing of the European Central Bank warned that Germany risked becoming "the sick man of Europe" unless the welfare system was reformed. The Christian Democratic leader in the Bundestag, Friedrich Merz, has since dispensed with Issing's modifying phrase to assert bluntly that Germany "is lagging behind the rest of Europe in all crucial economic areas and is now the sick man of Europe." Timed to set the tone for Germany's general elections last September, the research group of Deutsche Bank issued in July a long and thoughtful report titled "Is Germany Heading the Same Way as Japan?" Not quite, was the conclusion. Still, the bank's public view was that despite a political culture averse (like Japan's) to sweeping reform, and despite a damagingly expensive and restrictive social welfare system (like Japan's), Germany's banks were–unlike Japan's–not so awash in bad loans as to risk systemic collapse.

But there is growing alarm among Germany's EU partners, who depend on Germany paying $10–12 billion more each year into the EU budget (which falls just short of $100 billion) than it receives. Daniel Gros calls it the "new German problem." "Until recently," he says, "the 'German problem' in European affairs was how to deal with a country that was stronger than its neighbors and thus a menace to equilibrium on the continent. It now seems that the problem is the opposite–how to deal with a country that constantly under-performs."

Along with the American alliance, shaken by Chancellor Schroeder's insistence that Germany would not join a war against Iraq even with a United Nations mandate, Germany's long commitment to European integration is starting to fray. This is remarkable. Since joining the Coal and Steel Community, the first of the European institutions that steadily grew to become the European Economic Community and now the EU, in 1950, Germany has lived by the prescription of the novelist Thomas Mann for "a Europeanized Germany, not a Germanized Europe." Germany is not going to leave the EU or abandon the euro, nor will it block the grand project of EU enlargement into Eastern Europe, even though opinion polls suggest most Germans are dubious about it. But Germany is steadily losing both the will and the ability to continue its traditional role as the EU's open wallet. Moreover, the EU's own rules on competition and banning state aid to industry require the phasing out of the privileges of the state banks in the Lander and are putting sharp constraints on aid flows to eastern Germany.

Above all, the euro itself is imposing new strains. The European Central Bank's statutes call for keeping eurozone inflation below 2 percent a year, but unlike with the U.S. Federal Reserve, there is no parallel commitment for the bank to aim for growth and full employment. The result is that Germany is stuck with an interest rate that may work for the overheated economies of Finland and Ireland but depresses the German economy. The Deutsche Bank's Norbert Walter says the ECB interest rate is at least 1 percent too high. Finally, the Stability Pact simply precludes the kind of fiscal stimulus that Germany needs. Germany's inability to manage its own finances has brought home to German voters the loss of national fiscal and monetary sovereignty the euro imposes.

"There is no longer a German economy, in the sense that we can control it. We elect politicians but they are no longer in charge of our taxes, of our money, of our interest rates," says Michael Schrader, a former teacher who now works full time for the PDS in Dresden. "This is unbelievable. When we in the DDR [East Germany] joined in the new united Germany, we believed that we had joined a democracy where the people ruled. Not so. The bankers rule, and they are not even German bankers. Our people can vote for anyone they want, but their jobs and their earnings and their taxes depend on some central bankers in Frankfurt that nobody ever elected, and they tell us this is democracy!"

Discontent and Apathy

The PDS, while getting the support of one in five East Germans, can barely gain 5 percent of the national vote. But its political impact is important, not least because of its ability with antiwar, populist, and anti-capitalist campaigns to seduce some of the votes that would usually go to Schroeder's Social Democrats. The anti-American and antiwar agitation of the PDS troubled Schroeder's campaign advisers, and helped prompt him to declare his complete opposition to an American-led war against Iraq.

The PDS aims to expand beyond the old East Germany and establish itself as the nationwide party of the left. It now shares power in Berlin's municipal government with the Social Democrats. The PDS remains controversial in the former West Germany, but its adherents say that for all the evils of the old East German state and its omni-present Stasi secret police, its policies of full employment offer a telling contrast to the high unemployment of the new Germany. The mood of disappointment with the way unification has developed is important because East Germans tend to vote as a bloc in a way that makes them the decisive swing vote in the Bundestag. In 1990, in response to Chancellor Kohl's unification drive, they gave his Christian Democrats 42 percent of their votes to secure his landslide; they gave the Social Democrats just 24 percent. In 1998, feeling disillusioned, they switched to the SPD, giving it 35 percent of their votes–compared to 27 percent for the CDU–and secured Chancellor Schroeder's victory. Schroeder's campaign team was deeply worried that the East Germans would switch again, so when the devastating floods hit in August, Schroeder quickly seized the opportunity to visit, show concern, and pledge solidarity and funds. He had been lagging behind the Christian Democrats by 8 points in the opinion polls, but after this visit his campaign swiftly began to recover and carried him to a narrow and unexpected victory.

Young voters have become a major concern for all parties, given the steady decline in their interest in politics. The Shell Youth Study 2002 (a national survey financed every five years by the Shell Oil Group) found that barely a third of the 2,500 young people between the ages of 15 and 25 interviewed described themselves as "interested in politics," and only about 35 percent said they were sure they wanted to vote. The trend follows a general dip in interest in politics among the young, which began in the early 1990s. As a result, the various parties, youth organizations, and rock music television channels made a big effort to get young people to vote this year, and although the youth turnout rose only slightly, it may have made the difference in boosting the Greens from 6 to 8 percent of the national vote–and that was the margin of victory.

"The Parliament is the most powerful club in Berlin–and you decide who gets in!" proclaimed posters with a tough-looking bouncer standing against the silhouette of the Reichstag with his hand out to block entry. "Vote 2002–Without a Voice, Nobody Can Hear You" declared another poster depicting a popular German pop singer looking gravely at the camera with her lips stitched together. Professor Hans Merkens of the Department of Empirical Educational Science at Berlin's Free University says that young people are active in volunteer work and on behalf of specific issues, that "their apathy is aimed at official politics and the political system."

From his own experience of German students, Professor Gunther Hellmann says the problem goes even deeper. "Democracy is supposed to solve problems, but many of my students say that our democracy has become a mechanism to avoid them. This is not to say that they are against democracy. Far from it–there is little sign these days of the extremists of the Left that we saw in the Red Army Faction in the 1970s, and the extreme right wing is miniscule and divided and widely discredited. Young people today seem no longer to care about politics, about public life, or about a democratic system that seems alien to them. They want good jobs and money, and in a prosperous society such as this many of them have a great deal of money already–even if they don't know what to do with it. The sad thing is that with a handful of exceptions, mostly those who are evidently born to the academic life, there is so little enthusiasm about them for anything. And most of my best students go abroad to Britain or the U.S. for graduate studies or business school. More and more of them stay abroad; there is a quiet brain drain under way."

And if the German corporate sector is thinking about voting with its feet and leaving the country, it is already voting with its money by investing more abroad than it does at home. The flood of German investment into the low-wage countries of Eastern Europe makes sense both financially and politically as these nations join the EU's single market, but it is fueling a growing militancy among Germany's labor unions, which see jobs going abroad.

Despite some world-beating enterprises like Porsche and BMW, German companies are in grim shape. This year has seen a record number of bankruptcies. The Neuer Markt, the German equivalent of NASDAQ that was supposed to unleash a new wave of shareholder capitalism and entrepreneurs, is closing after losing over 90 percent of its value. The German media reports its own decline, amid the worst advertising recession in living memory. The Berliner Zeitung has gone under. The Frankfurter Allgemeine Zeitung has closed its Berlin supplement, launched with great fanfare as Berlin became the new capital, and is pondering whether to close its new Sunday edition.

The Fear of Change

It was in such circumstances that the British elected Margaret Thatcher, the Americans elected Ronald Reagan, and the French Charles de Gaulle. The Germans instead reelected Gerhard Schroeder with a majority so thin that the government will be hard put to enact any bold initiatives for the next four years. But the voters do not want serious change. The Free Democrats, campaigning on a bracing free market platform of tax cuts and deregulation, were outpolled by the Greens. The various groups of the far right, despite some thuggish skinhead militants who attract far more media attention than their influence warrants, mustered barely 2 percent of the vote. The socialist alternative of the PDS failed even to get 5 percent of the vote. The ship is dead in the water and leaking badly, but the German electorate voted to keep the same captain and crew in charge, under the order "Steady as she goes."

"This is a cultural phenomenon. Germans fear change," says Joe Joffe, editor of Die Zeit. "Yes, 10 percent are unemployed, but most people have a job, and those that fear unemployment want to be sure that the welfare state will be there for them when they need it. We don't have a full employment economy, but the welfare state and the growing black market means we still have a full income economy. This is still a prosperous country. Life is good, and there will be foreign holidays. The schools may be in decline, but the wealthy now send their children to boarding schools in England. The universities may be in trouble, but those who can afford it send their kids to Britain or the United States. Deep down we don't want change and we don't want risk. When I published that editorial about the 'blocked society,' I got a host of angry letters that asked in shocked tones if I wanted the American way of raw capitalism, the ruthless social model. As a country which is still shaped mentally by the memories of how dangerous change can be, we prefer just to muddle through."

But "muddling through" will not be an option as the demographic problem undermines the already unaffordable pension and welfare system. And Schroeder's weak government, with its razor-thin majority in the Bundestag dependent on the whims of its militant Green allies, is beset by restive labor unions and a Social Democratic Party that fears humiliation in the February state elections. Schroeder may well lose his home state of Lower Saxony. His personal approval ratings are at an all-time low, falling to 28 percent in December, as "Der Steuersong" (The tax song) topped the charts. In the parody of Schroeder, set to the tune of the pop hit "The Ketchup Song," satirist Elmar Brandt sings: "I'll raises taxes now because the election is over and you can't fire me now." At the same time, Schroeder's office was deluged with thousands of dirty shirts, after an Internet chat room launched a campaign that claimed his new taxes were "taking the last shirt off our backs."

Schroeder, although a born survivor and formidable campaigner, may not see out his term. If he does, the prospects are slim for serious economic and social reforms because the roots of the German crisis are far deeper than the fate of a single chancellor. In the 1960s, German democracy responded to this kind of systemic challenge with a grand coalition of both Christian and Social Democrats enacting an agreed agenda of reform. That may well happen again, if the Social Democrats, with their dependence on the labor unions, can agree to such a program with the management-friendly Christian Democrats. If not, Germany's serious problem of economic stagnation, social division, and political blockage could start to look hopeless, but without that Viennese flippancy that has allowed Austrians to survive hopelessness with flair.

Endnotes

Note *: Martin Walker is a senior fellow at the World Policy Institute and chief international correspondent for United Press International. Back.