The fall of the Berlin Wall, on November 9, 1989, was one of history’s truly epochal moments. During what became a revolutionary wave sweeping across the former Eastern Bloc countries, the announcement by the then-East German Government that its citizens could visit West Germany set in train a series of events that led, ultimately, to the demise of the Soviet Union itself.

Twenty years on, what is most striking to me are the massive, enduring ramifications of the events of November 1989. Only several decades ago, the Cold War meant that the borders of the Eastern Bloc were largely inviolate; extremist religious groups and ethnic tensions were suppressed, there was no internet (at least as we know it today) and travel between East and West was difficult. The two great Glaciers of the Cold War produced a frozen hinterland characterised by immobility.

Today’s world is a vastly different place. When one of the great Glaciers - the former Soviet Union – melted it helped unleash a potential torrent of security problems. We now live in an era characterised by huge mobility and instability, in which issues such as mass migration, international crime and international terrorism have a much higher prominence.

The end of the Cold War, together with subsequent conflicts across Africa, the Balkans and the Middle East, for instance, has led to many millions of people migrating the globe in hope or fear. In the West, this has given rise to pressure on jobs, healthcare, education, housing and cultural identity, causing local populations to feel threatened.

While international migration has generally been culturally enriching and beneficial, it has nonetheless also increased the range of threats to our societies. For instance, the 48 radical Islamicists implicated in terror plots in the United States between 1993 and 2001, including the 9/11 hijackers, all used legitimate immigration devices (e.g. “green cards”, student/tourism/business visas, and amnesty and asylum) to get into the country.

Getting to grips with this specific threat is a major challenge and the reason why, as UK Home Secretary, I placed so much emphasis on the need to overhaul our immigration system. Key elements of the changes I championed include a new points-based system — which represents the biggest reform of UK immigration procedures for more than half a century; electronic border controls (all UK entry visas, for instance, are now based on finger prints); and the National Identity Scheme which features compulsory fingerprint biometric identity cards for foreign nationals.

It is globalisation that lies at the heart of our transformational post-Cold War World. This inexorable process has extended the opportunities of world-wide interchange. Driven by technological advances in transport, communications, and electronic networks, globalisation has delivered massive opportunities in terms of mobility, movement and exchange of people, ideas, values, resources, commodities and finance.

But this same globalisation process and associated technology has also brought major new threats, or intensified existing ones, rendering everyone increasingly inter-dependent and vulnerable. The threat we face is seamless, running across the boundaries of defence, foreign affairs, domestic and social life. For instance, it has left nations and peoples ever more vulnerable to phenomena ranging from international crime and terrorism through to cyber-attack, health pandemics, energy-politics, resource shortage and financial crises.

The net result is that there are far more sources of insecurity than during the Cold War. The uncertainty this generates means that crises (defined as crucial turning points in events rather than as catastrophes) are more recurrent. Moreover, this bias towards instability is exacerbated by the fact that the nature of the potential crises we face is constantly evolving. In the context of international migration, for instance, terrorists and other international criminals are constantly trying to find new ways to evade our security safeguards.

Given the complexity of the threats we face, it is essential as a nation that we continually upgrade our capacity to deal with them by identifying, exposing and remedying our deficiencies. If we are to be able to keep up, and potentially be one step ahead of our adversaries, we will increasingly need to pool our ingenuity to innovate and deliver solutions.

This is a relatively uncontroversial ambition, shared by many. But I believe it requires nothing less than new thinking, new urgency and a new approach to studying tomorrow’s security problems today.

That’s partly why we are establishing the Institute for Security and Resilience Studies at University College, London. The new Centre will address projects of vital importance to national and international security arising from globalisation in the post-Cold War World. The goal is to assess and embed resilience as well as analysing threats; and to extend this analysis into action in outlining policy options to shape our preparation, response and recovery to crises.

This insistence on “embedding” resilience throughout organisational structures and culture is essential given the nature of contemporary society. Where there is, for instance, now a global availability of information through the internet, satellite and mobile communications, resilience to threats must be embedded in a decentralised way (rather than top-down). To the degree that resilience can ever be said to have depended on an elite management at the top of organisations, this is no longer the case — hence the need to bring together practitioners from the public, private and third sectors with academics in order to combine theory and practice in targeted projects.

The goal must be nothing less that ensuring that government, business and society can not only cope with, but flourish, in the increasingly uncertain times in which we live. The fall of that wall symbolised the emergence of a world offering both unparalleled opportunities and unprecedented insecurities. The challenge of maximising the first and countering the latter is a legacy demanding an ingenuity and endurance from the next and subsequent generations to match that of their predecessors.

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.

That brings us to the next urgent priority. The new Berlin government should reconsider the dodgy deal it clinched on the eve of the election to rescue the ailing Opel auto manufacturer. Germany promised billions of euros in state aid for a consortium of car parts maker Magna and Russia's Sberbank to take over General Motors' European arm in order to preserve four production sites and as many jobs as possible in Germany.

The European Commission has made clear that "bribing" companies to skew restructuring plans according to national interests breaches EU rules. Merkel should seize the opportunity to seek a deal with other countries with Opel and Vauxhall production sites to co-fund a restructing plan along strictly commercial lines. In the longer term, Opel will need a bigger industrial partner to achieve critical mass in the inevitable consolidation of European auto sector.

Fixing the banks and Opel will be the first two tests of whether Germany gets the change it needs. Tax cuts and welfare reform will take longer and be trickier, especially given the burgeoning budget deficit and debt mountain.

- Erik Kirschbaum is a Reuters correspondent in Berlin. -

Has this been dullest German election campaign in decades or the most exciting?  Has the battle for power in Berlin between Chancellor Angela Merkel and Foreign Minister Frank-Walter Steinmeier that concludes with Sunday’s election been a memorable showdown or a forgettably boring contest?

Many journalists, pundits and voters have complained it’s all been a merciless bore compared to the high-octane battles of the past with little action and precious few highlights.

But I would argue that in many ways it has been one of the most interesting campaigns in decades. Why? Because the outcome is so uncertain and there are more different government possibilities that could result from it than at any time in Germany’s post-war history.

Instead of the usual centre-right or centre-left choice that German voters had for the last 60 years, there are options galore this time — at least in theory.

There could be a centre-right government, another grand coalition or several three-way coalitions that could include the Free Democrats, the Greens and from a purely  mathematical point of view even the Left party that have never been tried before at the federal level.

On top of that, the opinion polls have once again tracked a dramatic narrowing in the lead that Merkel’s preferred centre-right coalition (Conservative  Christian Democrats  and Free Democrats) have over the three other parties — Social Democrats, Greens and Left party .

In late August Merkel’s centre-right had a 6-7 point lead and now, three days before the election, the final published polls on Wednesday showed their lead all but evaporated to just 1-2 points. Pollsters estimate that about 20 percent of the electorate has not yet made up their minds who they’ll vote for — how can  a completely uncertain outcome on Sunday not be considered exciting?

And yet Sunday’s election could also be historic for another reason — it might be the first time two parties take power despite failing to win a majority of regular seats in parliament.

Thanks to a quirk in the German election law, the conservatives could possibly win up as many as 20 extra “overhang” seats that could help them turn a deficit as wide as three percentage points into a parliamentary majority.

Whether such a government would be seen as legitimate in the eyes of the opposition and public remains to be seen.

Admittedly, there’s been few memorable verbal clashes between the main candidates this time around. This is the sixth election I’ve covered in Germany and I can’t remember seeing rivals for the chancellery ever behave with so much civility towards each other as his time around. But

I guess that should have been expected — they’ve shared power as Chancellor and Vice Chancellor in the grand coalition for the last four years. To suddenly start bashing each other probably would not have gone down well with voters and in the midst of the country’s worst post-war crisis I doubt there is much appetite  among the German Buerger  for mudslinging.

Both parties also warned us all along that the race would be concentrated into the final weeks  due to the growing number of late-deciders and undecideds — especially after the conservatives saw big leads disappear at the very end of the campaign in 2002 and 2005.

Der Spiegel nevertheless had an unusual theory — Merkel is deliberately trying to bore the voters to hold voter turnout down because she thinks it will help her. Few would disagree that she is not the most gifted campaigner Germany has ever had.

Certainly, there’s been none of the great “war and peace” battles of past elections that stirred voters against the backdrop of a Cold War, a Berlin Wall, and then a looming war in Iraq. In 2002 then-SPD chancellor Gerhard Schroeder shrewdly managed to turn his doomed campaign around by running against German involvement in the looming U.S.-led invasion of Iraq.

Frightened Germans turned to him in huge numbers and he pulled off an improbable comeback after being given up for dead just a month before. And who could forget the SPD’s next comeback in 2005 when Schroeder turned a humble professor from the University of Heidelberg into an unlikely villian after Merkel picked him as her shadow Finance Minister for his academic-sounding ideas on simplifying the tax code.  But turnout will nevertheless still be close to 80 percent.

This year’s election has also had its lighter moments.

One CDU candidate with little hope of winning her constituency in Berlin tried out the slogan “sex sells” by putting out a poster of herself and Angela Merkel highlighting their cleavage, a SPD minister had her official limousine stolen while she was on a holiday in Spain and it watched in horror as it erupted into a major issue, and a comedian who instantly became more popular than some of the smaller parties.

So who will win Sunday’s election? We couldn’t even venture a guess here. But we will keep you well informed of all the twists and turns on Sunday.

It will likely be a cliffhanger right up until moment the first exit polls are announced at 6 p.m. on Sunday and perhaps beyond. We’ll be posting live updates right here on the Global News blog all day and all night Sunday.

No longer just a hopeless cause for anti-capitalist activists, the idea of a global tax on financial transactions is gaining ground in Europe.

European Union leaders could not agree to put it on the agenda of this week's G20 summit on reforming the financial system in Pittsburgh, but the leaders of France, Germany and the European Commission endorsed the concept.

More strikingly, the head of Britain's Financial Services Authority, which regulates the world's second biggest banking centre, said last month that such a levy could help shrink a swollen financial sector.

"...If increased capital requirements are insufficient I am happy to consider taxes on financial transactions -- Tobin taxes," FSA chairman Adair Turner told Prospect magazine.

Nobel prize-winning U.S. economist James Tobin first proposed a small levy on currency trading in 1972 to penalise short-term speculation after the United States abandoned the gold standard and floated the dollar.

His idea found no takers then and lay dormant until the French-based anti-globalisation movement ATTAC (the Association for the Taxation of Financial Transactions for the Aid of Citizens) began campaigning for it in the mid-1990s.

In the meantime, the scope of the proposed tax, the policy objective and the proposed beneficiaries had changed.

French Foreign Minister Bernard Kouchner says he and British Foreign Secretary David Miliband have agreed to work on a proposal for an "international financial contribution" to fund development assistance. He estimated a voluntary contribution of just 0.005 percent on financial transactions
would raise 30 billion euros ($44.10 billion) a year.

Many key details remain to be worked out, such as who would receive and allocate the revenue and for what projects.  A plan will be put to a meeting of 58 nations in Paris next month to discuss innovative financing to meet the United Nations Millennium Development Goals. These involve eradicating
extreme poverty, hunger and disease, promoting gender equality,  health, education and clean water, and reducing child mortality.

Germany's Social Democrats, junior partners in Chancellor Angela Merkel's Grand Coalition which faces a general election next Sunday, say the proceeds of a Tobin tax should go to meet the costs of bailing out banks in the global financial crisis.

Don't hold your breath. Agreement on such a tax is anything but imminent. Merkel, a political conservative, said it would only be feasible if all the world's main financial centres agreed to levy it, and there is no sign that the United States is remotely interested.

Her support sounded like lip service, echoing widespread indignation among German voters at U.S. and British financial capitalism, which their leaders have blamed for the crisis.

Critics of the Tobin tax, including the banking and business lobbies, argue that a levy on financial transactions would drive business offshore, reduce trading volumes and liquidity, hit employment in the financial sector, harm shareholders and slow the world economy. They also say it would be hard to collect and easy to evade.

A lot of this is specious special pleading. Of course banks don't want to be taxed on lucrative high frequency trading. But  there is no inherent reason why there should be a tax on buying a car but not on buying a derivatives contract. No one seriously argues that you can't tax cars for fear of killing
jobs or driving the auto industry to Singapore or the Cayman Islands.

Moreover, it is hard to see why a fractional tax rate of 5 cents on every $1,000 would seriously impair liquidity. Britain has long charged stamp duty on share and real estate transactions, while the United States funds its regulators through a tiny levy on transactions.

The FSA's Turner argues that diminishing the turnover of the financial sector would be a worthwhile objective in itself to reduce the amount of "socially useless activity".

Perhaps the most salient criticism is that a Tobin tax would do little or nothing to deter risky financial engineering and excessive leverage. That is not its purpose.

With Western governments facing huge budget deficits and debt mountains due to the crisis, the funds available to help the poorest countries are bound to shrink unless new revenue sources are tapped. Taxing financial speculation is surely more appealing than raising taxes on income or labour.

Founded by computer geeks in Sweden in 2006 and now active in 33 countries, the Pirate Party is hoping to win over young, disaffected voters in Germany's federal election on Sept. 27 with demands to reform copyright and patent laws along with their policies that oppose internet censorship and surveillance. But do the single-issue activists, with no stance on foreign policy or the economy, even have the faintest hope of overcoming the five percent hurdle needed to enter parliament?

This looks unlikely given the 0.9 percent of the vote they won at the European parliamentary elections in June.  Nonethless, the Piratenpartei with more than 8,000 members is the fastest growing party in Germany, a development partly sparked by the German parliament's ratification of controversial legislation on blocking certain websites in a bid to fight child pornography.

Gero Neugebauer, political scientist at Berlin's Free University, said the traditional parties' failure to properly understand the internet may have put wind in the Pirates' sails. "The large parties have treated the issue as if the only people using the internet are old men with lewd ideas who want to look at pornographic images or practice paedophilia," Neugebauer said in a recent TV interview.  "If the Pirate Party manages to make clear in society the conflict which they presently represent ... then they definitely have the potential to get above the five percent hurdle," he added.

Among the ranks of the Pirate Party is a former Social Democrat member of parliament -- Joerg Tauss. He resigned under pressure in September amid an investigation into possession of child pornography by state prosectors. He denies any wrongdoing.  "The internet has been increasingly tightened in recent years and made into a civil rights-free zone," Tauss said in parliament when the legislation was passed. 

Alongside traditional campaigning methods, the Pirate Party has taken to the streets setting up model living rooms inside transparent containers in public squares to protest against what they see as an increasingly Orwellian police state.  Support could come from younger voters, who have grown up with the internet, and who feel that established political parties are out of touch with their concerns.

"I want to be able to exchange music on the internet with my friends for free," Florain Bischof, Pirate Party candidate for Berlin says on student networking site studiVZ. One of the party's main policies is an easing of copyright laws.

Germany's mainstream polling institutes do not include the Pirates as a separate party in their survey and it is not clear how popular the party would be among the population at large. So the question remains: how successful has the party been in shedding its image as a bunch of male software engineers getting stroppy about their surfing rights? And in Germany's greying population, with voters 60 and over making up 30 percent of the rapidly ageing electorate, is a campaign targeted at gamers and those who download music doomed to fall flat?

PHOTOS: A member of the Pirate Party (above) walks in front of the Reichstag as part of its campaign for the September general election in Berlin. The Piratenpartei Deutschland was founded in Germany on September 10, 2006, following a model of Swedish analog Piratpartiet. REUTERS/Thomas Peter Below, Joerg Tauss. REUTERS/Fabrizio Bensch

- John Bowker is Reuters’ UK transport and defence correspondent. The opinions expressed are his own -

Lord Mandelson was in buoyant mood on Thursday night.

The future ownership of British car-maker Vauxhall had finally been decided. U.S. giant General Motors agreed to sell its European unit — which includes Vauxhall — to Canadian car parts maker Magna and its Russian backers. According to Mandelson, this was good news for the Vauxhall’s 5,000 British workers as it removed the uncertainty over their futures. Everyone can get back to work making cars and live happily ever after.

But for Mandelson the game is only just beginning. He is putting on a brave face now but he must know it is not that simple. He says Magna has assured him to his face that the British plants in Luton and Ellesmere Port will remain open. But for how long? He cannot say. And at what cost? Again — the details are yet to be finalised.

The union leader at Ellesmere Port tells me that an earlier draft of Magna’s business plan called for 830 job cuts at the plant, about 40 percent of the work force. This will be tied to lower output and changes to the pension scheme. Meanwhile, both Ellesmere Port and Luton have no entitlement to build the newer ‘green’ cars that have become a staple condition for future state support. Ellesmere Port will build the new Astra from this month, but what about next decade?

It is hard to overstate how much political wrangling has gone into the GM deal. It has involved Washington, Belgium, Spain, Poland — but particularly Germany, where around half of GM Europe’s workers are based. Magna secured Germany’s support by promising not to close any German plants — so who will take up the slack?

Mandelson is obliged to provide state support to Magna in return for keeping Vauxhall afloat. But there is no way the deal will go through without at least some job losses - possibly many hundreds. That means the Business Secretary will be putting up millions of pounds of taxpayers money to support a company intent on cutting British jobs. Where’s the fairness in that?

The auto industry world has changed forever. We simply do not need as many cars as in the past, and the end of recession will not return demand to previous levels. This means Mandelson and Vauxhall workers must accept some scaling back. But how much do you accept? What good will it do? And how much will we have to pay for it?

These are not questions you envy Mandelson for having to answer. But that’s what we pay him for.

In his cautious Franglais central-bank speak, Jean-Claude Trichet has pointed to the strong possibility that the euro zone may face a double-dip or W-shaped recession.

Of course, that's not exactly what the European Central Bank president said. But how else are we to interpret his repeated references to a "bumpy road" ahead, and his comment that we are likely to see quarters with positive growth and other quarters with "less flattering" figures? All this was illustrated with a hand gesture that drew a W (or a corrugated iron washboard) rather than a V or a U.

True, he also said a significant contraction in economic activity has come to an end, and may be followed by a very gradual recovery. The ECB staff have lifted their economic forecasts for the 16-nation euro area after Germany and France surprised markets by exiting recession in Q2. The bank is now forecasting 2010 growth in a range from -0.5 to +0.9 percent, compared to its June prediction of -1.0 to +0.4 percent. But Trichet made clear there remains a high degree of uncertainty.

Furthermore, the ECB's only significant policy announcement -- that it will offer banks yet more 12-month liquidity at its basement 1.0 percent refi rate later this month -- was a strong indication that rates are on hold for the next year, coupled with another clear signal that ultra-loose monetary policy would not be withdrawn any time soon. "Today is no time to exit."

Even the ECB's most outspoken inflation hawk, Juergen Stark, is cautioning against any early withdrawal of the monetary stimulus.

The latest growth figures may indeed flatter to deceive. Germany probably only grew in Q2 because the government's cash-for-clunkers handout boosted the auto sector. That scheme ran out at the end of August.

Private consumption in France and Germany has been buoyant because of state-subsidised short-time work programmes that have kept people in jobs despite the collapse in orders. Those schemes expire late this year or early in 2010. In some cases, order books have filled and workers have gone back to full-time jobs. But unemployment is bound to rise over the next year to over 10 percent. That will likely depress consumer spending leaving the euro area's two biggest economies reliant on exports for growth.

Against this background, Trichet is right to keep monetary policy loose. With some voices in Germany's Sept 27 general election campaign calling for a premature return to fiscal orthodoxy, sage words from Frankfurt suggesting that recovery is not the bag, and that inflation is not currently the biggest worry, are welcome.

- Erik Kirschbaum is a Reuters correspondent in Berlin. -

Will the party that traces its roots to Communist East Germany’s SED party that built the Berlin Wall soon be in power in a west German state?

Or is the rise of the far-left “Linke” (Left party) in western Germany to the brink of its first role as a coalition partner in a state government with the centre-left Social Democrats (SPD) simply a political fact-of-life now so many years after the Wall fell and the two Germanys were reunited?

Will a “red” government in Saarland scare away investors and doom the state, as its conservative state premier Peter Mueller argues in a desperate fight to his job?

Or will the new leftist alliance in Saarland be able to better tackle state’s woes, as the SPD state premier candidate Heiko Maas insists?

Depending on your Weltanschauung, that’s what Sunday’s election in three German states boils down to — an emotional debate about whether the ex “Communists” in the form of the Left party should be allowed to be part of the next Saarland government or not.

It doesn’t matter that the Left has already been in eastern state governments and will probably also be part of the next state government in the eastern state of Thuringia, which also elects a new state assembly on Sunday.

The “Cold War” has flared up again in Germany ahead of Sunday’s elections in three German states, a closely watched warm-up for the national election on Sept. 27 when Chancellor Angela Merkel will be seeking a second term.

It’s hard to explain to anyone outside Germany why the Left party has been seated in state and local governments throughout eastern Germany for the last 15 years with hardly a murmur while it was until recently an absolute taboo in western Germany. It’s also not easy to explain to some Germans, especially those born after the Cold War.

But here goes: Many western voters have until now had a knee-jerk reaction to the Left party — as well as its predecessor the Party of Democratic Socialism (PDS), which is the direct descendent of Erich Honecker’s SED. Westerners remember the Wall, the shoot-to-kill orders, the barbed wire and the Iron Curtain that divided post-war Germany.

“It’s not a big deal in Saarland anymore,” Maas, the SPD candidate in Saarland, told me in an interview on the campaign trail in Saarbruecken this week. “The CDU is trying to make a scandal out of it.

They’ve been trying to whip up fears about ‘red-red’ for months but there hasn’t been any movement in the opinion polls. I think that shows people aren’t interested in the parties mud-slinging about coalitions. They’re tired of those games. They want political leaders to resolve their problems.”

Many eastern voters long ago realised the Left party is not the SED that built the Wall. In the east, the Left  has become the most powerful party in many regions partly due to nostalgia for East Germany but mainly due to its fighting for leftist ideals as well as standing up for the so-called “losers” of unification.

“A ‘red-red’ government would send Saarland down the tubes,” said CDU leader Mueller.  And Merkel added at a rally in Saarbruecken: “This state cannot be allowed to fall into the hands of ‘red-red’.” She does not use that line in her campaign speeches in the former Communist east, where she was raised, because she knows it would sound ridiculous to eastern ears.

The SPD rules out a “red-red” coalition with the Left party at the national level because of deep differences over foreign and economic policy. But it now says it is ready to open the door to such alliances in western states — after some painful experiences in the last few years. And Maas in Saarland could be the first to go through. The SPD will probably drop that ban on “red-red” coalitions at the national level someday as well after having abandoned it for eastern Germany in 1994.

So is it “The Commies are at the Gate in Saarland?”  Or is it just part of a democratic evolution that the renamed, reborn East German Communists are about to gain a small but important foothold in western Germany?
-
Tune into the Global News blog on Sunday evening for live blog coverage on the elections in the three German states.

Related Story: Merkel faces left threat in German state votes

It's not often you get to lift the hood and watch a power struggle going on in the engine room of General Motors. But the vice-president of GM Europe, John Smith, has just provided tantilising details of the arguments over the rival bids for Opel/Vauxhall, the main European arm of the fallen U.S. auto giant. Smith is the chief negotiator on the sale of Opel.

In a blog apparently intended to reassure Opel staff, but accessible to the public, he insisted GM had not specified a preferred bidder. But he made clear his own preference for the bid from Belgian financial investor RHJ International, which is loosely related to U.S. private equity fund Ripplewood, over the offer by Canadian-Austrian car parts maker Magna and its Kremlin-backed Russian partner Sberbank.

Smith's post is entitled "Clearing the Air" and was ostensibly written to clarify GM's intentions and dispel erroneous reports ascribed to interested parties. But his account shows just how poisonous the atmosphere appears to be between GM and Magna, and GM and the German government, which backs Magna's bid. It also suggests that the air is not too clear within GM's top management either.

Specific to the Magna bid, which is clearly preferred by several politicians and the Labor Bench, the bid presented to GM varied from the negotiations we had in the previous weeks and contained elements around intellectual property and our Russian operations that simply could not be implemented...

The bid from RHJI is completed and would represent a much simpler structure and would be easier to implement. It would require less monetary participation by the government and would keep our global alignments solid, while still creating an independent Opel/Vauxhall organization in Germany. This remains a reasonable and viable option to be considered as the very difficult issues around the Magna negotiations continue to be worked.

The following day, (July 29) Smith felt the need to add an update denying that GM was seeking to buy back control of Opel at a later date, or that it had asked the U.S. Treasury for financial assistance to restructure Opel. The former is strange since several sources have said a buy-back option is a key feature of RHJ's offer and not of Magna's.

So what is going on here and why did the chief negotiator feel the need to explain himself in semi-public in this way? One can only speculate, but one plausible theory is that GM's top management is split. This would not be surprising since the U.S. government now holds a controlling stake in the shrunken GM that emerged from bankruptcy, and Washington is probably being lobbied heavily by Berlin to support the Magna bid. A senior aide to Chancellor Angela Merkel discussed Opel with the U.S. Treasury on Wednesday.

If GM were to choose RHJ in defiance of Berlin's clearly stated wishes, it would spark a crisis with political ramifications just as Germany is entering the final phase of campaigning for a Sept. 27 general election. Might the Obama administration not lean on GM's top management in Detroit to avoid being branded as a potential job-killer in Germany? If so, Smith's blog may be a doomed effort to make business arguments prevail over politics.

Lufthansa <LHAG.DE> is milking an antitrust standoff with the European competition regulators to extract maximum cost cuts from Austrian Airlines <AUAV.VI> as it seeks to cement its dominance of central Europe's skies.
The German flag carrier has held back key concessions to the European Commission needed to secure approval for the takeover of the ailing airline while it squeezes further concessions from Austrian's workforce and its biggest shareholder, the Austrian government. It won another 150 million euros in savings from job cuts agreed in a third round of AUA cost-cutting this week.
The EU regulator, which supports airline consolidation in principle, is right to insist that the creation of a central European mega-carrier should not be at the expense of consumer choice on key routes such as Vienna-Frankfurt.
Lufthansa, which has set its own deadline of July 31 to clinch the deal, has the Austrians in a tight spot because the cost to the Austrian taxpayer would be far higher if it walked away. The Austrian government holding company, OIAG, says this could cost about 1,400 jobs and imply total costs of 840 million euros. The state has promised to assume 500 million euros of AUA's 1 billion euros of debt as part of a Lufthansa deal.
The German giant needs to reduce the cost of acquisitions it launched last year before the financial crisis hit air travel.
It has already beaten down Sir Michael Bishop to lower the cost of his majority stake in British carrier BMI [BMI.UL] and has snapped up Brussels Airlines, the successor to bankrupt Belgian flag carrier Sabena.
In the latter case, Lufthansa made concessions to the Commission on routes and take-off and landing slots to avoid restricting competition. But it has balked so far at the most important remedies for the Austrian deal, which concern what would be a monopoly on nine daily flights between Vienna and Geneva, operated jointly with another subsidiary, Swiss, and above all on feeder flights to its Frankfurt Airport hub to connect with its more lucrative transatlantic routes.
If the Commission does not stand firm on these issues, it risks being overturned by the EU's Court of First Instance, to which rivals Air France-KLM <AIRF.PA> and former Formula 1 racing ace Niki Lauda's latest venture, Fly Niki, would undoubtedly appeal.
Of course, Lufthansa could let the Austrian deal founder on EU competition concerns in hopes of picking up the pieces of a shrunken or bankrupt AUA later. But it might face competition were the airline's assets to be sold out of bankruptcy. Both Air France and a consortium of Air Berlin and Fly Niki were interested last time.
So the betting must be that, as with the Belgian deal, it will yield to Brussels' demands to clinch the deal in the end.