It's Decision Time

For those old enough to remember, there was a distinct echo in last week's big TV debate. Looking her audience square in the eye, Angela Merkel posed a question made famous by Ronald Reagan way back in 1980. Are we Germans better off today than last year, or the years before? Are our futures brighter? "If you have your doubts," she concluded, "then vote for the Christian Democrats."

It was more than Reaganesque rhetoric, delivered shortly before a pivotal election. Like Merkel herself, many Germans see their country at a political and economic watershed--very much like that which swept America's Republican Party to power 25 years ago. And like America of that era, Germany is stuck deep in an almost existential funk. A decade of close-to-zero growth and record unemployment has sapped its confidence. There's also a clash of competing visions, again as in Reagan's time. One promises to defend social gains seen to be in jeopardy--Germany's great welfare state, under assault by the tides of global capitalism. The other offers a potentially brighter but uncertain future--and only after long and painful changes. Only pro-market reforms can restore jobs and growth, say its avatars. Germans of every stripe believe they are wise to be wary.

Thus the battle lines are drawn, perhaps never so markedly in recent German history. "This election is about our destiny," Merkel proclaimed last week at a campaign rally in Berlin. But as lofty as that sounds, the vote is about much more, too. If, as chancellor, Merkel delivers on her pledge to get the country moving again, all Europe will feel the pull, and not merely because Germany is the continent's largest economy. Other nations facing similar problems could be inspired as well, possibly tipping the continent toward a more British economic dynamism. "If Germany reforms, France and Italy will be pressed to follow," says Katinka Barysch of the Centre for European Reform (CER), a London think tank. "That can only make Europe stronger."

Facing a similar choice in 1980, Americans ushered in Reagan by a landslide. But consensus-driven, cautious Germans are not so galvanized. According to last weekend's Allensbach poll, the opposing political camps are in a statistical dead heat. Merkel's Christian Democrats and her allies command 48.5 percent support, versus 48.8 percent for the main parties on the left--Schroder's Social Democrats, the Greens and the new Linkspartei, made up of communists and SPD defectors. The odds are near overwhelming that Merkel will still win the chancellorship. (Head-to-head, her CDU outstrips the SPD by close to 9 percent.) But without an outright majority, the prospect is that her party will be forced into a dreaded "grand coalition" with the Socialists--a recipe for "lethargy, bleakness and deadlock," as the Berlin daily Tagesspiegel warned last week.

All this means that those who might hope for a "Merkel revolution," analogous to Reagan's, may be disappointed. Indeed, next Sunday's result could become a muddle from the get-go. Apart from the tortuous pace of coalition politicking likely to ensue upon a close vote, there's the newly complicating Dresden factor. The sudden death last week of a far-right candidate means that 220,000 voters in the eastern city will have to wait to cast ballots for as long as two weeks. If the race remains as tight as Allensbach predicts--and remember, Schroder won by only 6,000 votes in 2002--those late-voting Dresdners could decide an election dragging out into October. And one can imagine the fight for the district that would result. Shades of Florida 2000.

Electoral flukes aside, there's another serious development: Germans seem increasingly hesitant to give Merkel a clear mandate for reform. Polls show that a plurality would favor precisely what she hopes to avoid--a grand coalition, without too much chance for substantial change. That helps explain why the comfortable lead Merkel enjoyed over Schroder just a few months ago melted away as her campaign platform became more concrete. Proposals for radical tax reform and vast cutbacks in state subsidies, in particular, have electrified economists but worried ordinary volk. "Even though they know there have to be changes, Germans fear competition and risk and have a strong desire for their government to provide security," says Thomas Petersen of the Allensbach institute. Seventy percent, he says, distrust capitalism and markets. That's treacherous ground for Merkel and her pro-reform, business-friendly allies.

If Germans' fears of insecurity are never far from the surface, Schroder has been a master at playing them. With election news temporarily eclipsed by Hurricane Katrina, Schroder hit a nerve when he reminded Germans that only a strong welfare state could protect them from calamity. The mess that's New Orleans, with all its suggestions of economic hardship and social inequality, demonstrates a clear fact, the chancellor told viewers in last week's TV debate: "We need a strong state." Vice Chancellor and Foreign Minister Joschka Fischer never tires of lashing out at the "coldheartedness" of Merkel's pro-market policies. It doesn't help that she has failed to articulate a compelling picture of how her reforms--which she admits will be painful--would improve Germans' everyday lives. On the stump, as in the debate, she bogs down in technocratic details that often lose her audience and only reinforce their concerns. Nor does it help that leading figures in her own party share doubts about going too far with what they call her "neoliberal" ideas. Intra-party cacophony seldom wins elections. Worse, it would make it difficult to execute her agenda as Germany's new leader.

The good news, for Germans as for Europe, is that the debate is taking place at all. No matter who wins, the country cannot turn back the clock. EU expansion--and the new competition it has sparked from within--is a done deal. Globalization isn't going away, nor the need for change. "Any government has to accept that, in some sectors, Germany won't be able to compete. Jobs will go to Eastern Europe or China," says the CER's Barysch. "That's the driving force for reforms, not whether or not Germany gets a Reagan or a Margaret Thatcher."

After all, it was the same Schroder, now portraying a Merkel future in the darkest terms, who set Germany on its cautious, unpopular but inevitable course of reform--and lost the support of his party because of it. Yet if Germans are realizing that they have no choice but to continue in this direction, history also shows the price of going too slowly. That's why the world will be watching the coming ballot so closely. If the winners on Sept. 18 slide into delay and confusion, their day of destiny may be lost.