THEY SHOULD BE SO LUCKY:

Angela Merkel, the new Maggie Thatcher: Free from the shackles of her centre-left coalition, Germany's leader can launch a bold new era (Alan Posener, 9/28/09, guardian.co.uk)

Goodness knows, the country needs a shake-up. The economic crisis has exposed Germany's vulnerability to international markets. The social safety net may have cushioned the impact of the industrial downturn, but the costs are horrific, and the Opel fiasco illustrates the dangers of relying too much on engineering skills and industrial prowess. Anything we can do, the Chinese can do better. And cheaper. But the whole system, from education via immigration to taxation, is geared to producing, protecting and pampering the famed Facharbeiter, the skilled industrial worker, and the mammoth companies that employ him (it's still mostly him, as it is in the German boardroom).

Smaller entrepreneurs and professionals have been squeezed from all sides: overtaxed, burdened by high payments for the social system, strict rules on hiring and firing and minimum wages – and unable to get hold of credit. The resulting frustration has led to the rise of the liberal Free Democrats, Merkel's new partners in government.

As well as lower taxes, a reform of costly healthcare and a more Anglo-Saxon approach to the labour market, the new government will probably want to keep Germany's nuclear plants running longer, to keep energy prices down and meet carbon targets. Look for an emphasis on competitiveness rather than consensus; growth rather than greenery; smart social systems rather than solidarity.

Merkel II, as Germans are just beginning to realise, means the end of an era: 11 years of Social Democrats in power (seven with the Greens, four with Merkel's Christian Democrats). It's not far-fetched to say that the era of New Labour is coming to an end in Europe. Tony Blair hijacked Conservative positions and profited from capitalism's 20-year boom. In Germany, Gerhard Schröder did much the same. Now David Cameron is hijacking New Labour's positions, as Merkel has been hijacking Social Democrat positions, with devastating effect. In opposition, Labour and the Social Democrats will inevitably drift to the left; in Germany, this will include some kind of rapprochement with the ex-Communist Left party – which should make them unelectable for the next decade.

In Europe a triumvirate of Merkel, Nicolas Sarkozy and Cameron – backed by José Manuel Barroso, the newly elected commission president – should ensure that the EU becomes leaner, meaner and more competitive. Germany's incoming foreign minister, Guido Westerwelle, is inexperienced, but Merkel has always been her own foreign minister, so don't expect any major changes.

Every election is determined by which of the two parties is more Third Way.

Posted by Orrin Judd at September 29, 2009 5:56 AM