Merkel to take reins of power

2005-11-20 10:19

Berlin - Angela Merkel is to be elected as Germany's first woman chancellor on Tuesday at the head of a coalition government tasked with turning round an ailing economy.

Two months later than she hoped, the parliament will vote to make Merkel the first woman leader of a major European country since Edith Cresson had a brief stint as French prime minister in the early 1990s.

When neither Merkel's Christian Democrats nor the Social Democrats managed to build a working majority with their favoured partners after the September 18 general election, the two parties were eventually forced into their unusual marriage.

"There is no meaningful alternative to the coalition with the SPD," Merkel said last Monday.

But the 51-year-old trained scientist from the former communist East Germany will have to control a government of traditional political rivals last seen in the late 1960s.

At least the unusual alliance will guarantee that the Bundesrat upper house of parliament will no longer block proposed reforms as it repeatedly did during the past seven years of the Social Democrat-Greens coalition.

Having seen off the challenge of outgoing Chancellor Gerhard Schroeder who initially refused to stand down, Merkel now faces a daunting task to inject new life into the biggest economy in the European Union.

She has said her government will be judged on its record of bringing down an unemployment rate stuck above 11%.

"The question is whether in 2009 people will be able to say we are doing a lot better than we were in 2005," Merkel said on Friday.

Most observers agree the German economy needs radical measures to drag it out of its malaise.

Yet many doubt whether this government will be able to deliver that solution, because the necessary compromises made to form the coalition have diluted the conservatives' original proposals to loosen the rigid rules governing hiring and firing.

The government manifesto they agreed is heavy on tax rises in a bid to slash Germany's public sector deficit.

Most controversial is a sharp hike in value added tax from 16 to 19%.

Analysts from UBS bank fear that raising VAT could nip growth in the bud, which in turn could fatally weaken the government.

"Planned tax rises for consumers suggest that any pick-up in aggregate growth next year could be followed by recessionary trends thereafter, an outlook that questions the credibility of the government's approach and the longevity of the coalition," their joint report said.

Other potential problems lie ahead, such as a long overdue reform of the health system which has been put on hold until 2006.

Schroeder, who will not hold a post in the new administration, has urged critics to back the government which contains members of his Social Democrats in many key posts, including the finance and foreign ministries.

"No one will be forced to cheer or love the grand coalition," he said.

"But this government carries unmistakably, perhaps primarily, the imprint of the Social Democrats."

On foreign policy, Merkel has signalled her intention of maintaining the French-German axis at the heart of the European Union by arranging to lunch with French President Jacques Chirac in Paris on Wednesday, the day after she is to take office. She will visit Brussels the same day.

Merkel has also said she wants to improve relations with the United States, which went into deep freeze over Schroeder's vocal opposition to the Iraq war.

Incoming foreign minister Frank-Walter Steinmeier said he planned to visit Washington in mid-December.

- AFP