AND SHE'S AS GOOD AS IT GETS:

Merkel's Unwilling Reform Coalition: Reforms? A fresh start? Not a bit of it. Instead of courageously tackling Germany's problems, the ruling coalition in Berlin has been settling for stop-gap measures, distributing cash it doesn't have and hiking taxes. Chancellor Angela Merkel's role is confined to that of moderator. (Der Spiegel, 5/10/06)

Merkel is living in a curiously parallel world these days. On the one hand, her popularity is easily explained. Her reticent, modest manner is a welcome respite from the wolf-like ego trips of her media-savvy predecessor Gerhard Schröder. With charm and determination, she quickly repaired Germany's damaged relations with the United States, redefined her country's ties with Russia and rescued European Union budget talks by following the example of her former tutor, ex-Chancellor Helmut Kohl -- filling EU rifts with German money.

But there is also something irrational about her unexpected love affair with the German people. Merkel runs a government whose appetite for reform in its first months in office has been confined to taking money out of people's pockets more unabashedly than any other government before.

The tax hikes agreed by Merkel and her cabinet will cost consumers more than €100 billion in the next three years. Most economists are predicting that the increases will hurt Germany's already weak economic growth.

Virtually every day the machine of government churns out new reform ideas which are largely based on the same principle -- that the welfare system should be rescued not through fundamental structural reform, but through never-ending cash injections. At the same time the government is displaying an astounding degree of creativity in spending billions of euros it doesn't have. The government's "growth package" aimed at boosting employment through investment in central growth areas will cost €25 billion.

There's an eerie calm on the reform front. So far the voters, tired of the loud and unsuccessful reform battles of the previous government, are thanking Merkel. "Don't worry...Be happy," is how "Newsweek" summed Germany's curious mood these days, adding: "Germans seem to prefer inaction from their not-so-new chancellor."

Strangely, no one is stressing the need for reforms more insistently than Merkel herself. She knows the disastrous state of the welfare system's coffers, and that the worst financial strains have yet to come in the next few years when the baby boom generation starts retiring and an ever decreasing number of employees has to pay for a growing army of retirees.

Even now, only 39 percent of Germans derive their income from employment, according to official statistics. The federal budget is almost totally used up paying for pensions, unemployment benefit, interest on debt and the military. Every cent spent on top of that, say on road construction, research or education is funded through debt. Germany is wasting its future.

Merkel is tirelessly pointing out these problems. She speaks of a closing window of opportunity for reforms, and that the changes will have to be more radical with each year that they aren't implemented. But she isn't following up her description with a plan of action.

The more radical the reforms required the less likely they'll ever happen because the higher percentage of elderly secular childless Germans with no interest in the future. If only Darwinism were true they'd have some hope, eh?

Posted by Orrin Judd at May 10, 2006 10:58 AM