Dragging economy pushes Germans to polls

Germans head to the polls Sept. 18 to elect a new government - a year earlier than planned. The vote comes at a critical juncture for Europe. Disagreements over the blueprint for the European Constitution, the next five-year budget, and the question of whether Turkey should become a full member of the EU are all major areas in which the new German head of state will have significant influence. Correspondent Andreas Tzortzis explains why the elections are early, who's ahead in the race, and what the implications are.

Germany's lethargic economy - and his unpopular and so far unsuccessful plan to revive it - brought his approval ratings to rock bottom this year. In May, voters in North Rhine Westphalia showed just how frustrated they were, voting his Social Democratic Party (SDP) out of power for the first time in almost 40 years.

Citing his inability to govern, Mr. Schröder took a surprise step by calling for federal elections one year early. Authorities approved the move, and on Sept. 18, Germans will vote on who they want to tackle the challenges ahead.

It may be too close to call. Upon his reelection in 2002, Schröder promised economic reforms. Earlier this year, his government passed Agenda 2010, which cut benefits for the long-term unemployed and reduced health-care subsidies. But Germany's deficit continued to rise and the measures ended up costing billions of euros more than expected. Programs initiated by his government to spark job growth fizzled and, as the number of unemployed climbed to nearly 5 million, his approval rating sank.

Still, Schröder is unparalleled in German politics in his ability to charm a crowd. Cut from the same cloth as Bill Clinton and Tony Blair, the charismatic politician has grown impressively into his role as a statesman while maintaining his connection to the common man. Unfortunately for him, Germans vote for parties, not candidates, so Schröder's 17-point lead over conservative challenger Angela Merkel in popularity polls means little.

Born in Hamburg, but raised in the former German Democratic Republic, the physicist entered politics later in life. Described as lacking charisma but possessing a sharp mind, Ms. Merkel joined the Christian Democratic Union (CDU) and made up for lost time by quickly becoming a favorite of then-chancellor Helmut Kohl and moving up the political ranks.

After the 1998 elections, Merkel, a Protestant, became the unlikely leader of a party with Roman Catholic roots and an old-boy's network. As the opposition leader, she raised eyebrows by supporting the US decision to invade Iraq, and attacked Schröder for not going far enough in reforming the economy.

A team of stylists and PR advisers has since freshened up her gray image. Campaign posters show a smiling, well-coiffed Merkel, and her campaign team has started playing the Rolling Stones ballad "Angie" after her stump speeches. If she wins, she will be the first female chancellor in German history.

Though she might not say it now, a coalition government of Merkel's CDU and the pro- business Free Democratic Party (FDP) would most certainly take a more aggressive reform track. She has already announced that she would raise the value-added tax and slightly lower corporate taxes and income taxes.

Above all, the conservatives would seek to shrink the power of Germany's unions and loosen the country's strict hire-and-fire laws. More flexibility in the tax code and in the labor market, they argue, would improve Germany's investment climate and boost job creation.

Don't expect any major shifts in German foreign policy under Merkel. Like Schröder, Merkel said she will not send any German troops to Iraq. Signaling her desire to develop warmer relations with the US, she has said she would "consult" far more with Washington on major decisions.

With almost 5 million people out of work, a deficit of 36 billion euros, and almost zero domestic demand, the challenge facing Europe's largest economy is clear. A majority of Germans realize their economic system needs reforming. Schröder promises reforms that will increase Germany's competitiveness and create jobs without cutting away too much security. Merkel says more reforms are necessary, but has been hesitant to push the reform agenda too much during her campaign. The two have also clashed on tax reform, college-entrance fees, more flexible hire-and-fire laws, the power of the unions, the planned elimination of nuclear energy, and financing of pensions.

German citizens 18 and up head to their local polling place, go into a booth, and put crosses on two pieces of paper. The first piece of paper lists the local candidates in their voting district. The second piece of paper is more important and is where Germans pick a party (see box at right). When all the votes are tallied, the percentage each party gets determines how many of those candidates listed actually get into the Bundestag, Germany's parliament.

These are critical times for Europe. The rejection of the European Constitution in France and the Netherlands, disagreements over the next five-year budget, and the question of whether Turkey should become a full member of the EU, are all major decisions hanging in the balance.

Like the rest of Western Europe, Germany is also struggling to better integrate its Muslim communities and root out Islamic fundamentalists. Key global issues, like the Kyoto Protocol, Iran's nuclear ambitions, the rise of China, peacekeeping forces in Afghanistan, and the Middle East peace process are all ones in which the Schröder government has been heavily involved. Trying to get a seat on the UN Security Council has been a foreign policy focus of late, something that will change should Merkel take power.

Social Democratic Party (SPD) - Franz Muentefering (leader). Germany's oldest party. Traditionally a champion of the unions, the SPD is seeing its union support slip away since Chancellor Gerhard Schröder introduced reforms to Germany's labor system in 2003.

Christian Democratic Union (CDU) - Angela Merkel (leader). Germany's conservatives. They are not as conservative as US Republicans, with importance of religion and the environment being the main differences. They have posted the majority of the chancellors in the postwar years. Longest-serving was Helmut Kohl, from 1982 to 1998.

Christian Social Union (CSU) - Edmund Stoiber (leader). The deeply conservative party with a heavy religious bent exists only in Bavaria, where it has dominated every postwar election. Mr. Stoiber lost to Schröder in the final weeks of the 2002 election campaign.

Free Democratic Party (FDP) - Guido Westerwelle (leader). The most pro-business of the German parties, the FDP wants a neoliberal approach to fixing Germany's economic ills and is the traditional government coalition partner of the CDU.

Green Party (Greens) - Reinhard Bütikofer, Claudia Roth (leaders). Born of the antiwar environmental movements of the early 1980s, the Greens joined the government for the first time in 1998 and have successful pushed through legislation like the ecological tax on gas, and gay marriage. Foreign Minister Joschka Fischer is a Green and consistently one of Germany's most popular politicians.

Left Party - Gregor Gysi, Oskar Lafontaine (leaders). A mix of the successors of the GDR communist party and disgruntled former SPD members, the Left Party was formed in May and currently leads the Greens and FDP in the polls. They advocate a socially minded approach to reforms that economists consider unrealistic.