How to Get Germany Rolling Again

The recent election leaves the ruling coalition of Social Democrats and Greens in power--but with a weak mandate to reform an economy that's looking more and more like Japan's. The odds favor another four years of political paralysis, creeping unemployment, and barely perceptible economic growth.

But it doesn't have to be this way. In fact, the economic reforms Germany needs are clear: Loosen the labor market to encourage hiring; cut subsidies and plow the money into tax cuts; require citizens to take more financial responsibility for their medical care and their pensions. The hard part is the politics. Rare is the elected official willing to force unpleasant change on voters, especially when the benefits won't kick in for many years.

Here are some suggestions to the major players in Germany for how to move the process forward.

To Chancellor Gerhard Schröder: Congratulations on your victory. Assuming that you're serious about serving only two terms, now is the time to start thinking about your place in history. Do you want to be remembered as the leader who left Germany a second-rate economic power? If not, start by breaking free from the interest groups, especially labor, that you so slavishly courted to win reelection. Make it clear that everybody must give something. Make it clear there are no taboos, including the job-protection law and the regional bargaining system that imposes the same wages on a small auto-parts maker as it does on DaimlerChrysler. Do the tough things now so voters can see the payoff by the 2006 elections. Then your successor may also be a Social Democrat.

To the losing conservatives: You already seem to be backtracking from the post-election rhetoric in which you vowed to bring down the coalition that Schröder had crafted with the Green Party. Good. Now, show you can truly be a constructive opposition party. That doesn't mean you must never criticize the Chancellor's program. Support reform, don't politicize it.

To the Greens: You are the big winners of this election, finishing in third position--just behind the two major parties--and saving Schröder's job. Your movement's leaders include some of the best minds in German politics, not only Foreign Minister Joschka Fischer but also such people as Kerstin Müller, the ranking Green member of parliament. You've grown up. Now, extend your competence and your influence beyond your traditional issue--the environment--and focus on the economy. Unlike your coalition partner, the Christian Democrats, you owe the unions nothing. Businesspeople are always surprised how much you understand their problems. But you've never really pushed your economic program. Do it now.

To labor: It's time you acknowledged that your wage demands and inflexibility have driven many industrial companies such as Siemens to shift manufacturing jobs abroad. Already, many of your local chapters are realistic enough to work constructively with employers, saving thousands of jobs. But at the top, union officials still speak in terms of class warfare. It's time to consider the idea that, by agreeing to discuss such taboo issues as job protection and regional collective bargaining, you could stem the steep decline in your own membership rolls.

Corrections and Clarifications In "How to get Germany rolling again" (Editorials, Oct. 7), the suggestions addressed to the Greens should have referred to their coalition partner as the Social Democrats, not Christian Democrats.
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