Germany's Merkel earns mandate for change

In securing a "center-right" coalition from German voters yesterday, Chancellor Angela Merkel has earned a clear mandate for change. Dropping her liberal coalition partner for one with more free-market tendencies, she now faces the great difficulty of acting on that mandate in Germany's new era of rising upstart parties and muddled politics.

On Monday, Mrs. Merkel pushed for a new government by Nov. 9 – the 20th anniversary of the Berlin Wall's fall – but she is already tactically backing off the tax cuts that were the main platform of her new coalition partner, the Free Democratic Party (FDP).

A day after Merkel's own Christian Democratic Union (CDU) limped in with a poor showing in an election that may upend decades of dominance by Germany's two biggest parties – tough talks are under way with the upbeat, pro-business FDP, Merkel's new partner, and Guido Westerwelle, its dynamic young leader.

The FDP is seeking four to five cabinet seats in the new government, German news sources reported today, and traditionally the coalition partner seats include the foreign and finance ministries – though foreign policy is mostly run out Merkel's office, and is expected to be firmly pro-Europe and transatlantic. "The watchword for [Mr.] Westerwelle is continuity with the EU and US," says Thomas Klau of the European Council on Foreign Relations.

Yet working with partners on the tax cuts and reform Merkel promised in the campaign will require considerable political clout, analysts say. To do so the East German-born chancellor may face something she's not experienced before – unpopularity, including within her own party. Merkel also opposes the strong reform of the German welfare system that the FDP backs – since the Christian Democrats have long backed social help.

Managing expectations

Merkel appeared to hedge on great expectations, noting the unusual moment brought by the economic crisis. German unemployment and social costs are expected to rise in the coming 16 months says leading economist Henrik Enderlein. German banks may need further help, and he told reporters that "I don't think Merkel can deliver on this."

German business leaders came out fairly clearly for the policies of the FDP in the days before the elections. On Monday, Mario Ohoven, head of Germany's federal association of medium-sized companies, told Reuters that, "Angela Merkel and Guido Westerwelle are the dream couple for German mid-sized companies." Mr. Westerwelle has long pushed reforms to make it easier for small firms to lay off workers – arguing current policies cause firms not to hire.

Change ... at a glacial pace?

"The elections are a remarkable mandate for change," says the Berlin-based American writer and businessman Robert Mackay, who knows Westerwelle. "The question is will that mandate be used. Usually change in Germany takes place at the speed of a glacier."

"She [Merkel] has a clear mandate, and a personal mandate," argues Jan Techau an economist at the German Council of Foreign Relations in Berlin. "But in terms of policies for the new government, I think everything will be overshadowed by the budget crisis. When you look at the amount of debt Germany has, there is very little government can do."

Sunday's election, where votes were disbursed among five parties, where the Greens scored lower than the hard-left Die Linke, and where the almost perfect lock the Christian Social Union, the CDU's sister party, had for decades in Bavaria was shattered – spells an extremely new and presumably tumultuous shakeout in German politics. The lack of turnout by traditional backers of the Social Democratic Party – one of the main German parties dating to the 19th century, itself is a mandate for change, generational and substantive, analysts say.