German Leader’s Hard Road

German Chancellor Gerhard Schroeder is finding out that leading his Social Democrats to victory in general elections a year ago was the easy part of his political battle. Governing is proving much more difficult. In three rounds of state and local elections this month, his party suffered humiliating losses. That has undermined Schroeder’s ability to carry out his plan to cut Germany’s profligate spending and scale down the costly social security system. But his reforms are critical to the economic well-being of Germany, a key member of the European monetary union, and he should stick with them.

All Schroeder had to do to win in last year’s election was to campaign in opposition to the rule of Helmut Kohl. The formidable Christian Democrat leader had been in power for 16 years, and Germany simply wanted a change. Schroeder didn’t stand for much then, and, a year into his term, German voters are still debating what he stands for. His expensive vacations, Cuban cigars and tailored suits alienated many of his own constituents, especially on the left flank of the Social Democratic Party.

But it would be unjust to attribute his party’s poor showing at the ballot box and his popularity decline in polling to his flamboyant style and uncertain leadership. Schroeder has taken on something even the mighty Kohl couldn’t accomplish when he was in power--reforming Germany’s welfare state.

Schroeder had little choice. The cost of reunification, a generous social security system and chronic unemployment has left Germany in a deep hole. The budget deficit ballooned 50% since 1994 to more than $830 billion. Interest on the government’s accumulated debt costs the treasury more than $45 billion a year. Germany has become the sick man of Europe, endangering the stability of the monetary union and its common currency, the euro.

His reform plan, calling for a budget cut, a freeze on pensions and welfare payments and the reduction of corporate taxes, won Schroeder praise from Germany’s European partners and the United States but damnation among Germans. Yet polls show that most Germans, while wary of radical changes, recognize that reforms are essential.

Clearly, Schroeder’s problem is not that voters don’t want reforms. He simply failed to sell the package to them. Rather than trying to placate the fringes of his own party, Schroeder should take his case to the voters and convince them they will benefit in the long run.