When German Politics Churn, Europe Wobbles

The first order of business for Chancellor Helmut Kohl when he returned from his summer vacation this week was to end speculation about a reshuffle of his Cabinet. He told the press there was "absolutely no reason" for a change, and pronounced himself "mightily angered" that the question had even come up.

But the speculation has continued.

The political uncertainty is threatening Chancellor Kohl's attempt to lead the European Union to the launch of a common currency in 1999, a key step in binding member countries together, making war between them an impossibility and increasing their economic growth.

The chancellor's inability to silence calls for some fresh faces in his nearly 15-year-old government is a sign of the "deep political trouble" he is in, says one analyst.

The reshuffle talk can be seen at least partly as summer political theater. "It's really a more internal affair," says Barbara Lippert, an analyst at the Institute for European Policy here, "having not so much to do with policies as with personalities. But it would be a signal for the euro if a key figure leaves at a more or less critical time.

The controversy was set off last week by the admission in a television interview by Finance Minister Theo Waigel that he doesn't see remaining in office beyond elections now set for Sept. 27, 1998.

"He's had nine hard years, and any reasonable person would understand" that he wants to step down, says Meinhard Miegel, director of the Institute for Business and Society in Bonn. "But politically, it was not smart to say so."

Mr. Waigel is not only a senior minister and chairman of the Bavarian-based Christian Social Union (CSU), a partner in Mr. Kohl's ever-more-fragile coalition government. As finance minister, Waigel is also point man on the currency union.

His credibility has come into question repeatedly over the past year, however, because of his inaccurate tax-revenue estimates and his very poorly received plan to balance the country's books by recalculating the value of the central bank's gold reserves. It's not clear how much more political heavy lifting is to be expected of such a lame duck - especially a self-laming duck.

Professor Miegel and Dr. Lippert agree that the key question goes beyond personalities. "What's clear is that within the [the CSU and Kohl's own Christian Democrats], doubts are growing as to the survivability of this government," says Miegal. The ultimate question, he and other analysts agree, is over whether Kohl is still the man for the top job.

J. Paul Horne, chief international economist at Smith Barney in Paris, who keeps a close eye on the Franco-German relationship, sees a cabinet shuffle as necessary, despite the chancellor's protests. "He needs to end up with a hard-euro bloc in his government," Mr. Horne says.

Waigel himself has been no soft-money man. But most of the German public opposes the introduction of the new euro, preferring to hang onto the nearly inflation-proof deutsche mark. Kohl's only hope for acceptance of the euro is to make an even stronger case that the euro will be as hard as the mark. Otherwise, Horne suggests, he could face a parliamentary defeat over the euro, or a rebuff from the Constitutional High Court.

Horne also expects Kohl to seek help from French Prime Minister Lionel Jospin, who is in Bonn this week, in "protecting Germany from imaginative Italian bookkeeping." Germans remain skeptical of the Italians' efforts to get their finances into shape for the currency union. Kohl may have to make clear to Mr. Jospin that, for Germans, the choice is between a hard euro, without Italy participating, and no euro.

It does not bode well for Europe that its biggest member is in this sort of funk. Germany is often referred to as the "locomotive of Europe." But, as the country's sometimes undiplomatic foreign minister, Klaus Kinkel, observed in an interview published just days before the Waigel bombshell was dropped, "To be a locomotive, you have to have some steam up, and you have to be moving forward." It's not clear, he allowed, that those conditions are being met.