Monday, September 28, 2009

Germany's Merkel looks to rocky new term

Fresh from an election victory, Angela Merkel was steeling herself for a new term as German chancellor Monday, facing a rash of problems, topped by an ailing economy and an unpopular Afghanistan mission.

German Chancellor and leader of the Christian Democratic Union (CDU) Angela Merkel jokes with the band Firecats after parliamentary elections at the CDU headquarters in Berlin. Fresh from an election victory, Merkel got set for a new term as German chancellor on Monday, facing a stack of challenges topped by an ailing economy and an unpopular Afghanistan mission.

"I think we've really earned the right to celebrate tonight," a beaming Merkel, Germany's first female leader and the only chancellor from the former communist east, told jubilant supporters in Berlin late on Sunday.

"But I want to say to everyone in this country that I want to be the chancellor of all Germans, so that things improve for our country ... We have a lot of work ahead of us."

Although the wildly popular Merkel savoured her victory, the daily Tagesspiegel said her 33.8-percent score, the right's worst since 1949, marked a "black eye" for the chancellor.

Die Welt daily hailed the election as "a success for the FDP," referring to Merkel's new partners in government, the pro-business Free Democrats, whose record 14.6 percent score tipped their centre-right coalition over the top.

Merkel's identified her "top priority" as tackling unemployment, which stands at 8.3 percent at present but is forecast to surge in the months ahead, as firms lay off workers on temporary part-time working schemes. Profile: Angela Merkel

A poll in Focus magazine showed that unemployment was also voters' number-one issue, with 38 percent saying it was the "most important topic for the future government," ahead of education, health and the financial crisis.

Europe's biggest economy has been hit harder than most by the global recession, slamming demand for its all-important exports and sending the country into its steepest recession since World War II.

Output is poised to slump by five to six percent this year, the government estimates, and Germany is also sitting on a vertiginous mountain of debt.

But this time around, Forbes magazine's most powerful woman on Earth will be in a different coalition, something she believes will help her implement the reforms she says are vital for lifting the economy out of its malaise.

For the past four years, her conservative CDU/CSU bloc has been stuck in a loveless "grand coalition" with the centre-left Social Democrats (SPD).

But now Merkel's bloc and the FDP have a comfortable 332 seats in the 622-member parliament.

"Our main objective has been achieved, namely a change of government, which for me is what really counts this evening," Merkel, 55, said on public television on Sunday.

Turnout was at a record low of 70.8 percent against 77.7 percent four years ago.

FDP leader Guido Westerwelle aims to become the country's first openly gay foreign minister.

The SPD crashed to 23 percent, its worst result since World War II, and will be condemned to the opposition benches after 11 years in government.

The FDP, meanwhile, returns to government after 11 years watching proceedings from the sidelines.

They will likely push the CDU to cut taxes and to reverse Schroeder's decision to abandon nuclear power by 2020.

Even assuming the new partners see eye-to-eye on all issues -- anything but a foregone conclusion -- Merkel's new cabinet will have its work cut out, however, even without Germany's economic woes.

The head of European economics at Bank of America Merrill Lynch, Holger Schmieding, said the dawn of a new-look cabinet was "not a revolution".

"There will be no dramatic changes but there will be some tax reforms over the next four years, and there will probably be some move towards deregulation modestly in the labour market and probably some changes in the health-care system," he told AFP.

The Financial Times Deutschland agreed: "Anyone who expected or feared the chancellor will make a radical change of course with her new government is mistaken."

In the foreign policy sphere, Germany's mission in Afghanistan is highly unpopular and could become a major domestic headache for Merkel if an insurgency in the north where its 4,200 troops are based continues to escalate.

The presence of German soldiers in Afghanistan has also prompted a string of threats by Islamic extremists, including from Al-Qaeda leader Osama bin Laden and German-born Muslims.


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