German election stuck in deadlock

Germany's political leaders wrestled Monday over who will form a new government after voters rejected Chancellor Gerhard Schroeder's seven-year-old coalition but left Angela Merkel's conservative party without a clear mandate to deepen economic reform.

Speculation was rife in Berlin over a possible "grand coalition" drawing the two major forces in German politics into government.

Sunday's elections failed to give a majority either to Schroeder's Social Democratic (SPD) government with the Greens or to challenger Merkel's Christian Democratic alliance (CDU/CSU) with the opposition Free Democrats (FDP).

A grand coalition of the SPD and CDU/CSU would face immediate difficulties in reconciling contradictory party positions on key issues laid out in their respective manifestos.

'Grand coalition' facing difficulties

Jobs: Both parties share the goal of cutting unemployment from close to 5 million, and there are points in common over the implementation of the "Hartz IV" reforms that cut benefits to the long-term unemployed.

But there the similarities end.

The CDU/CSU want to make it easier for firms to fire employees, seeing this as the key to greater flexibility in the labour market, but the Social Democrats reject this.

The parties also differ over central wage bargaining which fixes a single rate for an entire sector, with the Christian Democrats wanting greater decentralization.

Foreign policy: Turkey's application to join the European Union is a crucial point of difference that was highlighted during the campaign.

Chancellor Gerhard Schroeder strongly supports Turkish EU membership. But Merkel's CDU/CSU rejects Turkish entry to the 25-nation bloc and wants to offer Ankara what it terms a "privileged partnership."

In general, the Christian Democrats would distance Germany from Russia and seek closer ties with the United States.

Energy: The CDU/CSU wants to keep Germany's nuclear power stations operating. Schroeder's Social Democrats, with their Green allies, have ordered all nuclear plants to close down in the coming 17 years.

Health: There are crucial differences over how to finance burgeoning health costs, with the Social Democrats favouring a system that charges those with higher incomes more.

The Christian Democrats are aiming at a flat rate.

Taxes: There is general agreement that Germany's tax system is over-complex. The Christian Democrats want to increase VAT. Both parties aim to cut tax breaks and allowances.

There are differences over income tax rates, with the Christian Democrats wanting to cut the top and entry rates. The Social Democrats aim to raise the top rate.

Both aim to cut corporate taxes, but by differing amounts.

Germans resigned to stalemate

Confused Germans reacted with tired resignation Monday to the political deadlock bequeathed by the general election, and expressed little hope that their chief concern, mass unemployment, would ease.

"They all said they would improve things in Germany. But it was just about power. All they were bothered about Monday was who was going to be chancellor," said Mario Weller, 43, an unemployed electrician queuing at a Berlin labour office.

Merkel's conservatives had promised measures to encourage business to create jobs, such as easing rules on firing. Schroeder said his welfare reforms, including jobless benefit cuts, were starting to bear fruit. In the end, neither vision inspired the electorate.

Merkel's party has just three seats more in parliament than the SPD, according to the provisional result. Exit polls revealing the collapse of her once-commanding lead caused gasps of horror from her supporters and cheers from SPD campaigners.

In Germany as a whole Monday, the overriding feelings were confusion or reluctant acceptance.

Germans already have low expectations of their politicians. Polls indicate a majority believe no party will improve growth set to be the slowest in Europe this year or unemployment, which hit a postwar record of 5.2 million in February.

"No one really knows what's going on ... We'll have to see if something sensible comes out of it. But I don't think so. I think we'll have to vote again," said Manuel Oliver, standing at a newsstand in Frankfurt.

"I can only imagine a very difficult coalition. It's worse than before," said Bjoern Haller, a teacher from Dortmund.

The election showed the country split over whom to trust with Europe's largest economy, and whether to push for more reforms, as Merkel pledged, or settle for measures that had already brought thousands to the streets in protest last year.

A survey by TNS Infratest for the magazine Der Spiegel on Sunday suggested that 73 per cent of Germans believe further reforms can restore economic growth.

However, the same survey indicated that overwhelming majorities reject measures such as easing restrictions on firing workers or raising the retirement age to 67 in the face of Germany's greying and dependent population.

The new parliament must sit by October 18, and the parties will aim to build a viable coalition by then.

If the new parliament cannot elect a chancellor in three attempts, President Horst Koehler could appoint a minority government led by the candidate with a simple majority.

Source: China Daily