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Germany: Schr?der's Green Pals Are Crossing Him Up

Germany's Green Party took the nation by surprise when it joined Chancellor Gerhard Schr?der's coalition government in 1998. Instead of middle-aged revolutionaries, the Greens turned out to be teachers, dentists, and middle managers who tempered their environmental activism with desire for lower taxes and less bureaucracy. Led by Joschka Fischer, Schr?der's pragmatic Foreign Minister, the Greens helped push through $30 billion in tax cuts for corporations and individuals. "The Greens gave Schr?der a counterweight against the Socialists in his own party," says Commerzbank economist Eckart Tuchtfeld.

Now the Greens could tip the balance in the other direction. After a disastrous showing in a state election last month, the Greens are painfully reassessing their strategy. Already, some factions are retreating from fiscal responsibility and calling for heavy spending on populist programs such as free day care. "We have to find the issues that burn in the souls of young people," says Klaus M?ller, environment minister in the state of Schleswig-Holstein and a key party strategist. M?ller denies the party is backtracking on economic policy. Still, it sounds suspiciously like the Greens are veering back to their roots in the far left. Should that happen, things could get tough for Schr?der. He faces a continuing struggle to pull his own Social Democratic Party to the middle and is gearing up to run for reelection in fall 2002.

The Greens face a dilemma. Their move to the middle--including willingness to compromise on issues such as nuclear power--alienated radicals in the party without attracting enough new followers to compensate. The result: In an election in Baden-W?rttemberg in March, Green support plunged to 7.7%, from 12.1% in the previous state election in 1996. Nationwide, the party's support hovers around 6%. That's barely above the 5% margin needed to win seats in parliament.

Outwardly, Schr?der doesn't seem gravely concerned about the fate of his allies. For now, polls show him trouncing his likely opponents in the badly divided Christian Democratic Union in a national election. But that margin could narrow fast if the German economy gets worse. Economists are revising their growth predictions for 2001 from nearly 3% to barely 2% as the slowdown in the U.S. hurts business confidence. Unemployment has risen for the past three months, to 9.8%. That could spell trouble for Schr?der, who has vowed to cut joblessness. If the Socialists weaken just as the Greens crater, the next election could be dicey for the Chancellor.

SIMMERING. What will Schr?der do if the Greens keep losing support? He could team up with the liberal Free Democratic Party (FDP). But many old-timers in the SPD still resent the FDP for switching sides in 1982 and joining the CDU. That leaves one other course: helping the Greens win back voters. To give his allies a boost, Schr?der is letting the Greens take the lead on agricultural policy amid hysteria over foot-and-mouth disease. Renate K?nast, a Green leader and the new Consumer Protection, Food & Agriculture Minister, is positioning the party as defender of the consumer against adulterated food--natural turf for the Greens.

For the Greens, regaining popularity over the next few months will be key. By late autumn, political parties are expected to present their platforms for the 2002 elections. If the Greens still look weak, Schr?der may signal he's ready to dump them and cozy up to the FDP. Either way, it seems that realpolitik will guide the Chancellor's hand. Coincidence or politically motivated maneuver? As campaigning for Italian elections on May 13 reaches fever pitch, the younger brother of the candidate favored to win has come under investigation for embezzlement. Milan-based magistrates recently ordered a raid on the headquarters and bank accounts of Finanzaria, the holding company controlled by Paolo Berlusconi--the 51-year-old brother of center-right candidate for Prime Minister, Silvio Berlusconi.

Although Paolo has not been formally charged, magistrates say that they are looking into whether a company he controlled from 1991 to 1996, Simec, misappropriated up to $75 million in public funds. The regional government of Lombardy had allocated the money to Simec to develop and maintain a landfill outside Milan, but the money has not been adequately accounted for, magistrates allege.

Investigations into younger Berlusconi's financial records began last year when his Milan-based daily paper, Il Giornale, failed to pay $2 million in taxes due. Paolo denies any wrongdoing. Meanwhile, his brother's holding company, Fininvest, is not a target of the investigation.

Even so, the older Berlusconi's coalition, Forza Italia, is calling the magistrates' move a "left-wing vendetta" aimed at undermining the coalition's reputation. In any case, Silvio Berlusconi, whose own company has repeatedly been the target of investigators, looks set to win the premiership. He is leading center-left candidate Francesco Rutelli by about 10 points in the polls.

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