TO: Angela Merkel, Chancellor of Germany
FROM: William Drozdiak
RE: Getting Germany On Track
The look of dismay that crossed your face when the September 18 national election results flashed across television screens told the story. Even though the Christian Democratic Union (CDU) that you lead scraped past the ruling Social Democratic Party (SPD), with slightly more than 35 percent of the votes, it was the worst performance in any general election since 1949 by the CDU and its sister party, the Christian Social Union. Your preferred partner, the market-oriented Free Democrat Party, did better than expected with about 10 percent, but you still fell short of the parliamentary majority that you hoped would create a new center-right government in Germany, banish the old Social Democratic-Green alliance from power, and allow bold political and economic reforms. Now that you have reluctantly turned to the rival Social Democrats to build a so-called grand coalition, many pundits are predicting that ideological differences will prove so great -- and your clout so diminished -- that you will be lucky to lead for two years.
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These naysayers underestimate your skills and tenacity. You have climbed the political ladder by constantly exceeding expectations, rising to become Germany's first female chancellor and the first leader from the formerly communist East Germany. Like a political judo artist, you have mastered the knack of turning your vulnerabilities into strengths. With a little bit of luck, you can outfox your foes and lead an effective governing coalition that will restore the nation's confidence and strengthen Europe's largest economy. Here's how to make it happen.
Tell Germans to Get Back to Work: Germany is living far beyond its means, with the world's longest vacations, oldest students, and youngest retirees. Out of 82 million people living in Germany, only 27 million now hold full-time jobs, meaning one worker is supporting three citizens. Low birth rates, early retirement, generous welfare subsidies, and high unemployment have eroded the country's once vaunted work ethic and economic dynamism. Even though Germany is the world's leading exporter, its exorbitant labor expenses -- it costs about $33 an hour to employ a German worker, compared with about $19 in the United States and $6 in Poland -- are forcing companies to outsource jobs at an astonishing pace.
Given the growing public skepticism about immigrants in Europe, which the recent French riots only exacerbated, an influx of young foreign workers to address the demographic crisis is out of the question. Germany must recapture the spirit of the 1950s, when it recovered with remarkable speed and dynamism from the ruins of World War II.
You must help Germans understand that they cannot afford to retire at 50 and collect handsome pensions from their beach villas in Majorca. Instead, they should expect to work well into their 60s. Labor unions need to realize that it is fruitless to try to protect a shrinking number of manufacturing jobs when factory wages in neighboring states such as Poland and Slovakia are now a fraction of those in Germany. With their strong technical skills and good education, Germans can move up the economic ladder by emphasizing their most sophisticated technology and building up the service sector, instead of relying on their industrial base. You need to reinforce the message that change and economic reforms -- which so many Germans equate with bitter medicine -- are essential to preserving Germany's way of life.
Put Your Critics to Work, too: Some of your CDU comrades grumble that you offered too much by giving the Social Democrats eight out of 14 cabinet posts, including the ministries of finance, health, labor, and foreign affairs. But this seeming magnanimity could turn out to be a smart move, as it will place the burdens of responsibility for the most painful reforms -- such as revising the tax structure and cutting health and welfare benefits -- on the Social Democrats.
You may find that when it comes to controversial initiatives, such as shifting the balance of power between the 16 states and Germany's federal institutions, or raising the value-added tax, building consensus will be easier than you suspect. Many Germans are prepared to endorse a Churchillian appeal for "blood, toil, tears, and sweat" in adapting to the challenges posed by China and India in a new global economy. Many of the Social Democrats joining your cabinet realize that the time has come to alter Germany's complacent work habits, by asking citizens to toil longer hours for the same or less pay and pushing back the retirement age to 67 years. If they can convince their working-class supporters to swallow these reforms, you will be able to claim credit for achieving the impossible. If your coalition partners fail to persuade their rank and file, you can go to the public and blame them for not doing their job.
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