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Twice I have backed Schröder: but no more

By Sarah Schaefer. Source: Sunday Telegraph

For me, Gerhard Schröder's election as Chancellor in 1998 will always be a treasured political memory. I was standing in a bar in Blackpool at the Labour Party conference - I was a political correspondent in those days - when my mobile phone rang. It was my father, calling from Berlin to give me the amazing news that, after 15 years of CDU government, the tide had finally turned. America had Clinton; Britain had Blair; and now Germany had Schröder.

Four years later, I celebrated Schröder's second general election victory in London and, on that occasion, felt nothing more than a surge of relief.

This time around, though it pains me to admit it, I am not so sure. In fact, let me be honest: although I will not vote in this election, being long settled in London, I think Germany will be better off if Angela Merkel wins next Sunday.

I have been a progressive all my life: SPD in Germany, New Labour in Britain. So for me to find myself backing Merkel is as big a step as it was for Democrats to back Reagan and disenchanted Tories to back Blair. But the truth - and one which many on the Centre-Left in Germany are embracing, however reluctantly - is that the Schröder years have been an era of abject disappointment.

Look at the German economy: its strengths remain fundamental, and, to a great extent, untapped. That is why Schröder's delay in launching the economic reforms that Germany so badly needs has been inexcusable. Meanwhile, unemployment has soared to five million, or 11 per cent, levels last seen in the days of the Weimar Republic.

Some observers claim that unemployment has actually been healthy for German businesses because it has enabled companies to shed labour, cut costs and extend working hours without resistance from the unions. That is a point of view. But it shows little grasp of the corrosive effect long-term unemployment has on any society, and - more darkly - the appalling uses to which extremist parties have turned the grievances of the jobless in the recent German past.

Earlier this year, Schröder finally introduced a package of reforms, the so-called Hartz programme, but has encountered formidable difficulties in driving them through his own party. Part of the problem is that the SPD, unlike the Labour Party, has never had to go through a painful process of internal reform.

In Britain, losing a general election means powerlessness, then irrelevance and - possibly - extinction. In federal Germany, the political blow of losing an election is never so severe. Even in its 15 long years of national opposition, the SPD still held power in some of the key Länder, or states: it never really tasted life in the wilderness, and the desperation that comes with it.

During this election campaign, one in which the polls continue to oscillate, Schröder has made much of the fact that Germany is the world's leading exporter. No thanks to you, Germans might reply. It is precisely because Germany remains so central to the world economy - its links with the US are particularly intimate - that it needs comprehensive labour market reform, quickly and courageously delivered.

Labour market reform is in everyone's interest. My former boss, Denis MacShane, who was then Europe Minister, used to send cards, entitled "Social Britain", to fellow politicians in other European counties, when he was trying to persuade them of the merits of the opt-out from the European Working Time Directive. Lighter regulation, he argued, would make it easier for -companies to employ workers. Unemployment would fall. And - the richest irony - the unions who had been resisting market liberalisation would gain new members.

Germany in 2005 is not like Britain in 1979. It is easy to bill Angela Merkel as Thatcher-on-the-Rhine - easy, but wrong. The last thing Germany needs after the traumas of reunification is a collective handbagging. She will face formidable difficulties in building a consensus for her proposed market reforms. But it seems that she is willing to try, and as the first prospective Chancellor to emerge from the old DDR, has a "back story" that has the potential to mark a new beginning in German political history.

There is every sign that Mr Blair would be less than heart-broken if Schröder is defeated. His opposition to the Iraq war and close alliance with Jacques Chirac over the EU rebate have scarcely endeared him to the Prime Minister. In June, Mr Blair laid out his vision for Europe in a powerful speech to MEPs. His message was that if we are serious about enabling Europe to compete in the globalised economy, then new rules and a new culture are required. The view in Number 10 is that Schröder is not capable of delivering this change.

It was no accident that Mr Blair broke protocol when he went to see Merkel at the British embassy before an official visit to Schröder in Berlin in June. The two politicians have fundamental disagreements (not least over Turkey's membership of the EU, which Merkel, quite wrongly, opposes). But there was evidently a meeting of minds over economic reform. One can only hope that their relationship, should she become Chancellor, is sufficiently strong for Mr Blair to persuade her to change her position on Turkey.

As a German living abroad, finally, I fear for the German national psyche - and it is this, above all else, that has persuaded me that some things matter more than tribal party loyalty. It has always amazed me that a country that has taken on and achieved so much through re-unification can be so down-beat. But it is. Any other European country that had taken on an economy as shattered as that of the former DDR, would probably have collapsed. Yet Germany did not. It still has an extremely efficient infrastructure, highly-skilled workforce, world-class innovation and rich natural resources.

And yet few in Germany feel the confidence that might be expected to flow from this historic achievement. Though the world caricatures the German mind as aggressive and orderly, it has a deeper, melancholic streak: Germans famously see the glass as half-empty. And, at present, unsure of its destiny, it is no exaggeration to say that Germany is in the first stages of a national nervous breakdown. If we are so mighty, Germans ask, why do we feel so bad?

What Germany needs is something as basic as a new start. Even New Labour's fiercest critics would be hard pushed to deny that Britain - a country that had grown grey and tired - was rejuvenated by the first Blair victory in 1997. Of course, Germans thought that their own new dawn had come in 1998 with the arrival of Schröder - only to realise that they were still sunk in twilight. Perhaps next week, under the improbable leadership of a female conservative from the East, they will believe at last that their moment has come to be led into the sun.

Sarah Schaefer is Director of the Europe Programme at the Foreign Policy Centre