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SPD debacle shows agony of European centre-left
It was a black night for Germany’s Social Democrats. Their catastrophic general election score of just 23 percent was by far the worst since the creation of the Federal Republic in 1949. It was more than 11 points worse than their result in 2005, and nearly 6 points worse than their poorest post-war showing in 1953.(Picture shows party activists at SPD headquarters watching first exit polls on television)
Their shattering defeat was the latest in a series of debacles for the European centre-left since the onset of the financial crisis. Just when the social democratic outlook of a strong state to regulate and curb the excesses of the markets and protect workers from the rough edges of capitalism has made a comeback around the developed world, its original proponents are in disarray.
Why? Partly because the centre-left is blamed by its own voters for having embraced deregulation and globalisation without taking care of the losers of such policies. Partly because it lacks charismatic leaders of the calibre of Helmut Schmidt, Francois Mitterrand, Tony Blair or Barack Obama. And partly because new social and economic forces — the services sector and the knowledge economy — and new ideas — ecology and communitarianism — have moved the political goalposts.
France’s Socialist party has been consigned to opposition since 2002 and is deeply divided over personalities, policy and ideology. The British Labour Party, after a record 12 years in power, is deeply unpopular and looks doomed to lose a general election next year. The Italian left has not managed to mount a serious challenge to Prime Minister Silvio Berlusconi, despite scandals over the billionaire media tycoon’s sex life.
As in France, the SPD bled votes to the radical Left party, to the Greens, to the conservatives and to abstention. An estimated 2 million Social Democratic sympathisers stayed home. As many switched to the Left — a mixture of former East German communists and disenchanted former Social Democrats demanding red-blooded socialism and an exit from NATO and the European Union.
The SPD took the blame for unpopular curbs on unemployment benefits under former Chancellor Gerhard Schroeder, as well as raising the retirement age to 67 from 65 under the grand coalition with conservative Chancellor Angela Merkel. An election-day opinion poll showed 67 percent of SPD sympathisers believed the party had betrayed its principles on these issues.
The party now has a chance to regenerate itself in opposition. But it will share the hard benches with the more outspoken Left party, which scored a record 12.5 percent on Sunday, and the environmentalist Greens, who draw a lot of young and educated voters. The SPD’s electorate is shrinking or dying out — pensioners, trade unionists, manufacturing and public sector workers. Whichever way the party goes in opposition, it stands to lose as many voters as it wins back.
Germans vote for change; will they get it?
Germans have voted for change. A centre-right government with a clear parliamentary majority will replace the ungainly grand coalition of conservatives and Social Democrats that ran Europe’s biggest economy for the last four years.
This should mean an end to ”steady as she goes” lowest common denominator policies, and at least some reform of the country’s tax and welfare system. The liberal Free Democrats, who recorded their best ever result with around 14.7 percent, will try to pull the new government towards tax cuts, health care reform, a reduction in welfare spending and a loosening of job protection in small business.
Conservative Chancellor Angela Merkel, a cautious centrist, made clear in her first post-election comments that she she would not allow a radical lurch to the right. She promised to be the ”chancellor of all Germans” — old and young, entrepreneurs and workers — and said the conseravtives would be sufficiently dominant in the new coalition to prevail “in questions that affect social balance”.
The new government faces tough economic challenges in what is bound to be a more polarised political atmosphere, with the Social Democrats in opposition. The economy is expected to contract by at least 5 percent this year, and export-led growth is likely to return only slowly. Unemployment is set to explode in the coming months as short-time work schemes run out. The budget deficit is set to top 6 percent of gross domestic product next year, more than twice the EU limit. So 2010 will be an extremely difficult year. But there are some problems that are even more urgent.
The first big choice involves Germany’s ailing banks. Outgoing Finance Minister Peer Steinbrueck admitted last week that the public-owned regional Landesbanks “continue to pose an enormous systemic risk to our market”. The outgoing parliament passed a virtually useless “bad bank” law meant to encourage stricken financial institutions to put their toxic assets into state-guaranteed special purpose vehicles. The banks have so far spurned the system because it leaves the risk of losses with them rather than with the taxpayer.
Merkel and her new partners need to amend the law so that the state takes more of the risk, otherwise Germany faces a future of “zombie” banks that are too burdened with liabilities to lend to the real economy. That won’t be popular, with the left bound to claim that taxpayers are being forced to bail out wealthy bankers.
Fixing the banks is more urgent than cutting taxes or curbing public spending to revive the economy. That also means merging the Landesbanks, shrinking their activities and privatising as much as possible. The Germans must also be ready to allow healthy foreign banks to buy up sickly German ones. That is the logic of the European single market, to which a centre-right government is likely to be more committed.
Dear Writer,
Your article on recent German election results and for future political forecast are very fine, interesting to get lot of comments from many well readers on economics,particularly from German thinkers and from many world political leaders.
My predictions of Mrs.Merkel victory on this one sided election became true.
Yes.She has emerged a world famous political leader and for her country.
I have already posted my comments in BBC Have Your say,after getting latest news from New York Times.
Her latest tackling worse recession,economic collapse,job losses and panic moods from Germans were handled in very practical ways.
Whereas , America and UK had not solved their problems on war footing ways.
Good news ,we are getting from Germany and to rest of this world.
I wish that,Germany will be prosperous on many fields in future days,months and in future years.
Congratulations to her for entering to second term as a Chancellor in Germany.
After a great German Chancellor,Merkel had created a noted history on Germany political map.
Schaeffler/Conti feud puts Schroeder back on stage
Gerhard Schroeder is back at centre-stage, seven weeks before Germany’s general election. A corporate feud between industrial holding group Schaeffler and car parts maker Continental AG has given the former chancellor the chance for a comeback as the workers’ champion, although he no longer holds public office.
When Schaeffler, the biggest family-owned industrial company in Germany, bought control of Conti last August, the two sides appointed Schroeder as guarantor of the interests of Continental and its workforce, shareholders and other stakeholders under an investors’ agreement.
With the new owners now trying to oust Conti CEO Karl-Thomas Neumann, the former chancellor has used his powers to demand information from Schaeffler – and take legal action if necessary — to enforce compliance with the pact. Neumann’s sin is to have proposed a share issue that would dilute Schaeffler’s control.
A published summary of the shareholders’ agreement does not explicitly bar Schaeffler from seeking to remove Conti’s CEO, but it commits the owners “to support the ongoing strategy and business policies of the Executive Board”.
Latest reports on Monday suggested Schaeffler was seeking a compromise in which both Continental chairman Rolf Koerfer, a Schaeffler loyalist, and Neumann would go — as would the disputed share issue — to avert a showdown at a Conti supervisory board meeting on Wednesday.
Schroeder’s cameo role has political overtones. It looks like part of a strategy by the Social Democrats (SPD), junior partners in an uneasy coalition with the conservative Christian Democrats (CDU/CSU), to paint themselves as the true defenders of German jobs and companies against predatory Big Finance.
The SPD is trailing far behind the CDU/CSU in opinion polls, with about 23 percent compared to 36 percent for Chancellor Angela Merkel’s conservatives.
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The Wall
SPD moved so far to the right that everyone stayed home or voted die Linke or other left parties. Kurt Beck the man in SPD who wanted to stay true to SPD values was forced out by the conservatives 2 years ago. We’ll see what happens now. My German family all voted for the Pirate Party by the way.