The Hindu Business Line : Schroeder's call for early elections: Political suicide?

GERMANY is passing through a phase of strong economic and political convulsions, with the surprise announcement by the Chancellor, Mr Gerhard Schroeder, that general elections would be held early following the ruling coalition's crushing and humiliating defeat in the country's largest, richest and predominantly industrial state of North Rhine Westphalia.

The German elections are not due till 2006 and now Mr Schroeder is being seen as risking his third term in office on the outcome of an early general election, likely to be scheduled mid-September.

The ruling Social Democrats were ousted from power on Sunday in North Rhine Westphalia, a state widely rated as the heartland of the German economy, now rated as Europe's largest "locomotive" economy and the world's third largest ($1 trillion plus).

The German economic slowdown is obvious. When Mr Schroeder came to power in 1998, the economy was growing at 2.8 per cent a year and by the end of this year its rate will be a dismal 0.7 per cent.

Apart from the record high rate of unemployment, one third of the German workers today consistently worry about losing their jobs and 85 per cent express concern for the future.

Once unemployed, it takes a person 33 weeks to find alternative employment and many families are permanently dislocated. Given this dismal economic background, German voters may be loath to give Mr Schroeder a third term in office.

His lacklustre and mediocre performance on the economic front has been poignantly reflected in Sunday's state election.

In his television address, Mr Schroeder said, "With the bitter election results for my party in North Rhine Westphalia, the political basis for continuation of work is called into question." The German Chancellor also admitted that the benefits of the economic reforms have yet to trickle down to the grassroots. Germany's unemployment has crossed 5 billion — the highest in its postwar history. Mr Schroeder stated, "For reforms to continue, which in my view are necessary, I consider a clear support by the majority of Germans to be essential."

The call for early elections has triggered a raging debate in major European capitals about the prospects of Mr Schroeder remaining in office for another term.

The opinion polls have not been encouraging but Mr Schroeder has been able to cash in on the reality that the Opposition has failed to produce a leader with mass appeal and charisma, which in some measure the German Chancellor still retains.

Mr Schroeder is articulate and tele-genic. However, not many Social Democrat party activists are convinced about Mr Schroeder's gamble; as one Social Democrat put it: "It is a political suicide — I am furious." This sentiment is reflected across the rank and file of party activists.

Taking most political analysts by complete surprise, Mr Schroeder said he would go to the polls before autumn or before September-October. Political analysts are perplexed, as Mr Schroeder's reason for an early election is still mystifying.

Germany's economy has brought unprecedented prosperity and the highest standards of living to the people but there are nagging doubts about the German administration's ability to indefinitely sustain this economy. Germany's economic growth may even fall below one per cent by the end of this year. Its labour costs are among the highest in world — a skilled worker costs an employer $47 per hour.

Labour-intensive German manufacturing companies are therefore setting up manufacturing plants in Eastern Europe and in some parts of Asia. A Social Democrat leader recently bitterly attacked the capitalist system describing as "locusts" the companies which "exported German jobs", and did not invest in retaining domestic jobs and moving instead to "greener pastures" outside Germany to maintain their competitive edge. Despite current pessimism about Mr Schroeder returning to power, it may be premature to write the political obituary of the German Chancellor.

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