Online Extra: The Opposition's Game Plan for Germany

Christian Democratic Union Deputy Chairman Wolfgang Schaüble on economic reform and the need for Europe to unite with the U.S.

Germany's Christian Democratic Union is about as strong as an opposition party can be. The center-right CDU just triumphed in state elections, and its chairman, Angela Merkel, gets better poll ratings than Social Democrat Chancellor Gerhard Schröder. The CDU is already using its newfound power to challenge the government on such issues as its opposition to U.S. policy on Iraq and plans for domestic tax increases. But will the CDU also push for risky reforms, such as deregulation of the German job market?

Wolfgang Schaüble, a party veteran who's the CDU's deputy chairman, discussed these and other issues with BusinessWeek Frankfurt Bureau Chief Jack Ewing. Following are edited excerpts of their conversation:

Q: The CDU is in a very strong position. You won the recent state elections [in Hessen and Lower Saxony]. The upper house of Parliament, the Bundesrat, is in your firm control. What's the strategy of the CDU now to use its newfound strength?


What I should first point out, because there is some misunderstanding about it, is that what we can't do is change the makeup of the Bundestag [the lower house of Parliament, which initiates legislation]. The majority is still held by the Social Democrats and Greens.

For legislation that requires approval of the Bundesrat, we'll be able to use our majority to push through some of the things we believe in. [But] there won't be a blockade on our part. We'll try to reach reasonable solutions that are in the national interest.

Q: What are the most pressing matters to be debated in the coming weeks and months?


The most important issue is making the economy more dynamic. [That's one of the reasons] we need a more flexible labor market. We've proposed giving companies more freedom to make individual agreements with workers on severance and job protection. We have to cut some of the bureaucracy out of the labor market. We urgently need to reform the health-care system.

And we won't allow tax increases. Our position is that the increases [proposed by the government] aren't going to happen. Wherever there's an opportunity to regain some economic dynamic, we'll do it, because the economic prospects for the country are really bleak.

Q: Realistically speaking, what are the chances that these reforms can actually be pushed through?


That depends on the internal debate in the Social Democratic Party and whether [Chancellor Gerhard] Schröder has the strength to stand up to the labor unions. He has our support, but as I said at the beginning, we don't have a majority in the Bundestag, and without the Bundestag there won't be any legislation.

Q: There are also news reports that some people in the CDU want to try to drive Schröder from office.


Unfortunately that's not going to happen. Party Chairman [Angela Merkel] has already said that it's an absurd debate. You need a majority in the Bundestag, and we don't have one! It's just a question of mathematics. It's an artificial debate created by a certain Sunday newspaper, and there continue to be people who fall for it.

Q: How unified are the conservatives at the moment?


I think on the fundamental questions there is general agreement. We are one of the major parties, which means we have to find a compromise between economic interests and social policy. But on the issues I've already mentioned, we've shown that we can do that. We have a clear position on foreign policy. The unity of the [conservatives] is very substantial.

Q: Is Merkel now in a stronger position? Does she have the full support of the party?


She's doing her job well. She is a strong and successful party chairman, and she's cooperating very well with Edmund Stoiber [the Bavarian prime minister who challenged Schröder as Chancellor last year]. That's very important.

Q: Is the next election in 2006 already a factor? Are there clearly some others in the CDU who would like to run for Chancellor?


There are always journalists who are interested in the personnel debate, but we're in complete agreement that we won't take part. Of course everybody wants to be Chancellor -- that's a fundamental law of politics! But Mrs. Merkel's leadership is unchallenged.

Q: What role is Iraq playing in domestic politics? Is it a distraction?


Schröder is, of course, using it to distract attention from economic problems and unemployment. But that isn't going to work. The attempt to blame all the economic woes on Iraq is too easy to see through.

Q: Will it be simpler to make progress on domestic issues once Iraq is no longer an issue?


I don't know. On the one hand, there's a growing perception among the general population that we're in a dire situation and that change is urgently needed. That makes things easier. On the other side, the resistance within the Social Democratic Party is very strong. Schröder is also weaker within his own party. He was strong when he could promise the party success, but now he has suffered big defeats and has catastrophic poll numbers, so I don't know if he's strong enough to push reforms through the SPD -- assuming he even wants to.

Q: Assuming there is a war in Iraq and it ends successfully from a U.S. point of view, what role should Europe play in reconstruction and administration?


I'm not ready to talk about what happens after a war. I still hope that it will be possible to disarm Iraq without a war. For that to happen, a precondition is that the Europeans show more unity and stand more clearly on the side of the U.S.

When the Europeans waste their strength trying to restrain the U.S. rather than putting pressure on Saddam Hussein, they strengthen Saddam Hussein in his attempt to escape the decisions of the Security Council. So the first condition is a unified Europe. Europe and the U.S. must work in the same direction.

The next step will then be for Europe to take a bigger share of responsibility for stabilizing the region. Then we can talk about what we can contribute. That's why it was completely inappropriate for Schröder to say we're not taking part at all. It was completely inappropriate in terms of putting pressure on Saddam Hussein and completely inappropriate in terms of strengthening the Atlantic alliance. It weakened Europe and must be corrected.

Q: Has the U.S. given enough thought to what should happen after a regime change?


One can only hope. The risks are great enough that any careful preparations can't exclude the possibility that things don't turn out as well as one hoped. But in any case, it will be necessary to maintain and increase the commitment of America and Europe in the Middle East. Without a strong commitment, the chances for favorable development are very slim. Precisely for that reason is it necessary to fix the damage in the transatlantic partnership.

Q: So one can assume Europe and Germany will play a role?


Germany's role has, through the mistakes of the Chancellor, become very marginalized. But I still hope that the Europeans will regain their unity. Above all, I hope that Britain and France can find a way together and then with Germany and others to move toward a stronger European role. But that requires unity and not this old game of fear. That's the worst thing we can do.

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