The leader of Germany's SDP now has the tough task of convincing voters he is capable of coming up with the goods
German chancellor Gerhard Schroeder's political fate may well depend on whether he can convince his countrymen of his rosy economic view.
With the German national election looming in September, Schroeder looks increasingly vulnerable each day.
His Social Democratic Party is seriously lagging the opposition, which consists of an historical alliance of the Christian Democrats and a Bavarian counterpart, the Christian Social Union.
According to this week's Stern magazine, Schroeder's party trails the alliance by 8%. Data from the Forsa market research firm shows support for the Social Democratic Party has fallen to 33%.
Completing the rout is healthy voter support, at 9%, for the Free Democratic Party, a junior opposition party. In the old days, when the centre-right controlled Germany, the Christian Democrats, the Christian Social Union and the Free Democratic Party formed a majority ruling coalition. That all went by the wayside when Schroeder beat Helmut Kohl in the 1998 general election.
Schroeder may well have met his match in the person of Bavarian prime minister Edmund Stoiber, who is pulling in the polling numbers in a way that was unthinkable a few years ago when his party was wracked by campaign finance scandals.
At the rate things are going Stoiber may succeed in ousting Schroeder and return his party to power.
Still, Schroeder is an accomplished politician who cannot be written off easily. But he has problems ' little problems and big problems. Recently, a little campaign finance problem for his party emerged, concerning local party units in the state of North Rhine-Westphalia.
Like all political scandals, this one may take on a life of its own or it may fizzle out. As luck would have it, Philipp Holzmann AG, a 152-year-old German building company, has filed for bankruptcy protection. Some estimates say that as many as 25,000 Holzmann workers worldwide could lose their jobs. While it is not Schroeder's fault, the news makes him look like bad karma for the working voter. Far more important is the simple fact that Schroeder has not delivered on campaign promise number one ' the creation of jobs.
In this regard, things have begun to brighten some. That may account for Schroeder all but singing 'happy days are here again' in a recent speech when he declared 'clear signs' of an economic recovery are at hand for this quarter.
European Central Bank chief economist Otmar Issing seems to agree, pronouncing: 'Recent data points to a recovery starting moderately in 2002 and accelerating through the course of the years.''
Better yet, Issing said the European Central Bank expects annual inflation to fall 'below 2% in the course of the second quarter of this year.'' That means the ECB may have room to push down lending rates.
But let's not get carried away. This is the ECB we are talking about. Put it this way, given the less than 2% inflation outlook, the ECB hasn't a leg to stand on if it were looking to push up interest rates.
Or so you might think. Issing conditioned his outlook for inflation with this remark: 'A favourable outlook for price stability rests fundamentally on the assumption that wage moderation will continue.'
Too bad, Gerhard. It looks like Issing is on to the IG Metal problem. Trust a former Bundesbanker to smell inflation a mile away. Those guys are like bloodhounds when it comes to consumer prices.
IG Metall is Germany's second-largest union. Talk is of walkouts for higher wages. Strikes may follow if the union doesn't get satisfaction. Schroeder the statesman is calling for labour and management to be responsible in their negotiations, in so many words, to balance the need to spur domestic demand and allow companies to cut costs.
It went in one ear and out the other. When push comes to shove, Schroeder, as a head of the Social Democratic Party seeking re-election, will go with labour.
Bloomberg Connecticut newsroom
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