ANGLOECONOMICS WITH A SOCIALIST FACE:

Economic reformer in Merkel's cabinet (Judy Dempsey, 10/13/05, International Herald Tribune)

Angela Merkel's ambitions to introduce economic reforms received a boost Thursday after Germany's Social Democrats chose Peer Steinbrück, a former state premier and strong supporter of modernizing the economy, as the country's next finance minister.

Steinbrück, 58, a former finance minister and premier in the powerful state of North Rhine-Westphalia, is charged with reducing the budget deficit, curbing public debt and introducing a reform of the cumbersome taxation system - all major issues left by his predecessor. [...]

Despite losing the election in North Rhine-Westphalia, Steinbrück has over the years built a reputation as a tough reformer. When he was finance minister in a state accustomed to protecting its miners and handing out generous subsidies and then later as state premier, he challenged those old privileges.

He was also willing to strike deals with Merkel's Christian Democrats, which leading Social Democrats said Thursday was a good omen for the coalition's ability to work together.

In 2003 Steinbrück and Roland Koch, the Christian Democrat premier of Hesse, together drew up a plan to reduce tax breaks and subsidies, including on coal, which had been a sensitive issue in North Rhine-Westphalia, where most of the coal mines are and which over the years has been a Social Democratic fiefdom. Nevertheless, Steinbrück and Koch, often mentioned as a future chancellor, agreed that all subsidies would be reduced by 12 percent over several years.

Steinbrück, however, faces a much bigger challenge on the federal level because it is such a high-profile post. Gernot Erler, a member of the executive committee of the Social Democrats, said Steinbrück "holds one of the key positions in the government. We are in the front line." When asked if it was a poisoned chalice for the Social Democrats, Erler replied "it is an enormous test."

The Social Democrats will also control the Labor Ministry, another crucial portfolio, since success or failure to reduce the 11.7 percent unemployment rate will rest with this ministry.

The ministry will be led by Franz Müntefering, 65, who will give up his job as parliamentary leader of the Social Democrats to Peter Struck, the popular defense minister.

Struck, who is 62, managed to transform the army from a static, conventional force trained to protecting Germany's borders during the Cold War to a mobile, flexible army capable of being deployed almost anywhere in the world.

Where's that been tested?

Posted by Orrin Judd at October 14, 2005 8:46 AM