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Merkel Victory Holds Seeds Of Major Political Realignment

German Chancellor Angela Merkel and her senior CDU colleagues: This way or that?
German Chancellor Angela Merkel and her senior CDU colleagues: This way or that?
Chancellor Angela Merkel won a famous victory for her center-right coalition in this weekend's German elections. But there is less in this result than meets the eye -- and more, too.

First, Merkel's victory was clear but quite narrow. Her popular majority over the left-wing opposition parties amounts to a few percentage points. How big a mandate for change does she have?

Second, there will almost certainly be changes in government policy as a result of the change of government. But how important will those changes be? And how will the voters react to them?

Third, the result nonetheless has the seeds of major political realignments in future German politics -- realignments that may not be to the advantage of Chancellor Merkel. And those realignments will be determined largely by the success or failure of the new center-right coalition.

Let's begin with what will change hardly or not at all: German foreign policy. All parties agree that Germany should exercise joint leadership of Europe alongside France, enjoy a strategic political and economic partnership with Russia, and become America's most important friend in Europe -- though not necessarily America's best friend there.

Ukraine, Georgia, Eastern and Central Europe, and dissidents throughout the post-Soviet space will be wary of what these priorities mean for them; a close Russo-German relationship may mean a Europe that ignores threats to their security. But the current U.S. administration should be fairly comfortable with these approaches -- especially since the tone of the CDU-FDP foreign policy will be more pro-American and more energetic.

For the moment at least, that means German troops will stay in Afghanistan. But the contradictions of a policy that pits the interests of the Russo-German relationship over those of fellow-EU members will emerge eventually -- if only because Russia's demands seem to grow with their acceptance.

Fork In The Road

It is on economic, financial, and budgetary matters that policies are likely to change most plainly -- and long-term political risks likely to be taken.

With the economically conservative Free Democrats (FDP) as her junior partner, Merkel now has the coalition for free-market reforms and greater business efficiency that she has always said she wanted. But it may be more market- and business-minded than she ever intended.

Because they won almost 15 percent of the popular vote -- far higher than anyone expected -- the Free Democrats may not remain junior. They will have more power to insist on the reductions in tax and regulations on which they campaigned. Many in Merkel's own party agree with them.

But the economic picture still very mixed -- indeed, it is confusing.

Germany is emerging from the recession quite well. Its export markets are recovering. Germans seem confident that the worst of the financial crisis is over and that their banks and money are safe. On the other hand, joblessness is likely to rise as special measures to combat it come to an end. And the budget deficit already stands at 6 percent of GDP -- very high for Germany and very worrying to inflation-conscious Germans.

The needs of the federal treasury, it seems, conflict with those of the German economy. What the treasury needs is either cuts in spending or tax rises. What the economy needs is tax cuts (and deregulation) to boost domestic demand in line with increased export demand. This vicious circle can be squared only by quite large cuts in public spending. Yet the combination of tax cuts and spending cuts would be very risky politically.

Which way do the voters want Merkel to jump? Most commentators assume that the Germans are risk-averse economically: They have it good and they don't want to lose it. In particular, they want to keep their generous health and welfare benefits, their long holidays, their cozily regulated work environment.

That seems very plausible. But the Social Democrats (SPD) bet very heavily on this cautiously conservative option -- defending the social market economy in its entirety -- and they suffered their worst defeat since 1945. Whether or not they are risk-averse economically, voters are certainly not risk-averse politically. They are redrawing the entire political spectrum.

Consider these statistics: Germany's two major parties between them got a bare 57 percent of the total vote. More than four in 10 voters chose other parties -- the Free Democrats (15 percent), the Greens (11 percent), the unreconstructed neo-communist Left Party (12 percent), and a handful of also-rans. None of the three "major minors" reached as high as 10 percent four years ago. And in an election that she actually won, Merkel's Christian Democratic Union (CDU) got its second-lowest percentage of the popular vote ever.

Mainstream And 'Fringe'

As the European elections showed on a continent-wide basis four months ago, the center-left is shrinking badly, the center-right is barely holding its own, and the parties on the misnamed "fringe" are steadily gaining ground.

In most European countries it is populists and nationalists who are winning votes because mainstream parties have refused to deal with voter anxieties over such issues as Euro-skepticism and immigration. In Germany this week, the Free Democrats made the biggest gains because all the other parties were united in a large woolly social democrat consensus.

That consensus is now breaking down -- a center-right coalition with radical policies would be a huge blow to it. And as it breaks down, it will release other political tendencies hitherto imprisoned in it.

Merkel herself is an ambiguous figure. Since the last election she has presented herself as the prisoner of the consensus, constrained by her Social Democratic governing partners in the grand coalition. In this election she campaigned overtly for an alliance with the Free Democrats. Since the victory she has used coded language to suggest that she will not allow them to upset the social balance with radical policies.

Soon, however, she will have to choose one way or the other -- tax cuts or tax hikes, market reforms or continued overregulation. Both courses have dangers for her personally. If she takes risks with market radicalism, she may drive voters into the hands of a still-powerful left and lose the next elections heavily. If she merely tinkers with the social market, she may alienate not only the Free Democrats but also those Christian Democrats who blame their disappointing result on her earlier timidity -- and lose power before the next election.

Whatever she decides, however, we will finally learn whether or not Angela Merkel really is Germany's Margaret Thatcher.

John O'Sullivan is a former special adviser to Margaret Thatcher who is currently executive editor at RFE/RL. The views expressed in this commentary are the author's own and do not necessarily reflect those of RFE/RL