It ain't over till it's over, especially in this quirkiest of German election campaigns. That there is an election at all is strange enough: the surprise call for next month's national vote by embattled German Chancellor Gerhard Schroder amounted to a virtual resignation a full year before the end of his term. Now, the return to politics of two charismatic, populist leaders is sending even more tremors across Germany's political landscape--and may yet throw a wrench into the conservative opposition's plans to succeed Schroder after September.

It's an odd couple that is upsetting German politics. The diminutive Gregor Gysi, a rhetorically gifted ex-communist dialectician, has returned from his private law practice to lead the election campaign for the successor party to East Germany's communists. Oskar (Red) Lafontaine, the rabble-rousing former chairman of the Social Democrats and Finance minister under Schroder, has quit the SPD in a huff. Last month, he installed himself at the head of a new western German protest group called Election Alternative for Jobs and Social Justice, made up largely of union members, anti-globalization activists and left-wing Social Democrats who hate Schroder's economic reforms. Two weeks ago, the two splinter groups formally joined forces and dubbed themselves Linkspartei the Left Party. Last Thursday, a new poll by Infratest Dimap gave the new party a stunning 12 percent of the national vote.

Its program is an amalgam of voodoo economics at home and anti-American resentment abroad. The party wants to slap corporations and the rich with a 64 billion euro tax increase to finance higher welfare payments. Lafontaine has suggested Iran should be allowed to have nuclear weapons so it can defend itself against Israel. Blaming "Fremdarbeiter" (a derogatory Nazi-era term for foreign workers) for stealing Germans' jobs, he has successfully appealed to right-wing extremists as well, who share the left's loathing of "capitalists and speculators." Never mind that only 25 percent of the Linkspartei's own supporters trust it to solve Germany's problems. "It's a classic populist protest party," says Infratest elections expert Jurgen Hofrichter, pulling in discontents on both ends of the political spectrum.

The Lafontaine-Gysi combo is gaining momentum at a strange moment in European politics. More than just capturing frustration with German joblessness and welfare cuts, the rise of the Linkspartei echoes a growing resentment across the Continent against mainstream politics, open markets and "neoliberal" policies to boost economic growth. In a sense, the Linkspartei is the German reflection of the French and Dutch "no" votes against the EU constitution, with all their anti-establishment undertones.

For Germany, the Linkspartei may signal a historic change. "So far, Germany has been spared a populist party in Parliament," Hofrichter says. Unlike in neighboring Austria or Belgium, right-wing parties have quickly been stigmatized, faced police investigation and never allowed to gain a prominent role. Communist parties--historically strong in France and Italy--haven't had much of a following beyond the former East Germany. By mingling right-wing nationalism with left-wing socialism at a time of huge economic anxiety, the Linkspartei has the best chance yet of becoming a permanent--and potentially destabilizing--rabble-rousing force.

Clearly, it has profoundly changed the upcoming electoral math. Because the Linkspartei is pulling votes from both the left and the right--as well as getting disaffected nonvoters back to the polls--the overwhelming lead of conservative candidate Angela Merkel has just about melted away. She and her coalition partners are now at 49 percent. Schroder has vowed not to share power with the Linkspartei, but many in his party disagree. With the Social Democrats polling at 28 percent, an alliance with the Linkspartei and the Greens (at 8 percent) turns the September ballot into a dead heat.

The ultimate casualty may be German reform. The new mood of discontent has led all parties--except the tiny pro-business Free Democrats--to water down reform proposals. The Social Democrats and Greens are outdoing each other with new tax-and-spend proposals, and SPD leaders have joined the Linkspartei in calling for sharp wage increases to "boost" the German economy. Campaign hyper-bole is nothing unusual. The trouble begins when such destructive populism takes the place of political leadership. It remains to be seen whether Germany's political class can put this genie back in the bottle.

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