The CDU received around 48 percent of the vote in both ballots--an increase over its tallies in the previous elections of 12 percent in Lower Saxony and 5 percent in Hesse. The SDP took only 33 percent of the vote in Lower Saxony--a 14 percent decline. They also slipped further behind in the CDU-controlled state of Hesse, where their 29 percent tally registered a 10 percent decrease over last time.

The results strengthen the CDU majority in the Bundesrat, or upper house of parliament.

The elections took place in the context of a continuing crisis in Europe’s largest economy. In January Germany’s jobless rate topped 11 percent, as the ranks of the unemployed swelled to 4.6 million--the most since Schröder was elected in 1998 and the highest unemployment rate in the European Union (EU) after Spain.

In response to the election result, commentators in the big-business press of both the United States and Europe have repeated their constant theme in face of the ongoing German economic crisis: the government, they say, should cut state spending on a range of social entitlements and get rid of basic protections won by workers.

Citing financial and political figures, the New York Times’ Frankfurt correspondent wrote that the setback for Schröder "might liberate his government, at long last, to undertake a wholesale reform of Germany’s hidebound economy.... Any effort to reform the economy, experts say, must begin with Germany’s labor laws and its welfare system."

Speaking of a "confrontation" with the unions, Martin Hüfner, the chief economist at Hypovereinsbank in Munich, predicted that "the social climate will be a lot rougher in the next few years."

Schröder’s minister of economics and labor, Wolfgang Clement, who was appointed at the time of the government’s reelection last year, has said that he will make it easier for bosses to fire workers, and has announced a plan to slash jobless benefits.

Treating laid-off workers as scapegoats for unemployment, government officials have touted the measures as a weapon against unemployment. The proposals include the cutting of benefits after three years if unemployed workers do not accept the jobs they are offered; the conversion of the offices that currently distribute benefits into "job placement agencies;" and the allotment of subsidies to employers who hire workers into low-wage jobs.

The plan’s outline was drafted by a government commission headed by Peter Hartz, a member of the board of directors of the auto giant Volkswagen.

Clement’s "reform" includes the push for a more "flexible labor market"--a catch phrase for measures aimed at weakening union power, reducing job security, and giving employers a freer hand to fire and hire workers.  
 
Germany’s weight within Europe
Germany accounts for more than one-third of the eurozone’s economic activity. Shifts in its economy have a significant impact in the entire region.

When the government announced in January that the federal budget deficit had risen to 3.75 percent of Gross Domestic Product, exceeding the EU limit of 3 percent, it prompted a sharp exchange between the EU administrative body in Brussels and Berlin.

The EU’s economic commissioner Pedro Solbes said that the problems in the world economy are not the only factors to blame for Germany’s economic woes. Solbes called for "far-reaching structural reforms to raise Germany’s very low growth potential."

While agreeing with Solbes, Clement pointed out at a January 7 news conference that there is another factor propelling the country’s economic woes. According to the Associated Press, the German minister said, "The [EU] commission also had to take into account the enormous sums still being spent to bring the former communist East Germany up to western levels."

Just over a decade ago the rulers of Germany were confident that the country’s reunification would reinforce and expand its economic strength and political weight. The opposite has happened. Berlin has poured hundreds of billions of dollars into the east in the last 13 years. Far from becoming profit-returning capitalist investment, most of these funds have gone to pay for unemployment benefits and other social programs.

Union struggles have helped place obstacles in the way of moves to slash these subsidies, with workers on both sides of the former Berlin Wall taking action to demand the equalization of wages and working conditions nationwide.

Such demands are boosted by the significant disparity that still exists between eastern and western Germany. In the eastern part of the country, for example, unemployment is currently almost 19 percent, nearly double the national average.

When 3 million public sector workers threatened to strike for a pay increase last month, one of the union’s central demands was for equal wages for public sector workers in the east. The union eventually won a pay increase of 4.4 percent over 27 months. The government said that it would bring pay for public sector workers in eastern Germany to the same level as the west by 2009.

The metalworkers union has demanded equal pay for the same hours of work in a contract dispute covering some 300,000 workers in the auto, electrical, and mechanical engineering industries in three eastern states--Berlin, Brandenburg, and Saxony. Currently union members in the east work 38 hours to receive the equivalent of 35 hours in the west.

Martin Kannegiesser, the president of the employers’ organization, complained about the demand. "The longer working week is the last competitive advantage the eastern German metalworking industry has," he said.

The German rulers have expressed fears that the U.S.-led war in Iraq will bring further problems for Germany. The government’s annual economic report released in January warned that "a war would pose incalculable issues that cannot be taken into account in the annual forecasts." It added that it "could have lasting negative effects on international financial markets, oil prices, and consumer and business sentiment."  
 
Germany fears to lose out
Germany’s ruling families fear that the war, aside from reasserting U.S. predominance in the imperialist pecking order, will see them lose out in a postwar land- and oil-grab. An October 2002 report released by Deutche Bank--Germany’s largest bank and the second largest in the world--stated, "If Saddam’s government is replaced--as seems to be the priority for the Bush administration--and sanctions ease, then the corporate lineup in Iraq may well feature U.S. and UK companies, particularly if there has been a U.S.-driven war in the country."

Berlin continues to take an official stance of opposition to any immediate move to war, arguing that United Nations "inspections" should continue a while longer and that the UN Security Council should decide when to move. Schröder built his successful election campaign last year around a slogan of opposition to the U.S. course.

Meanwhile, Berlin is cooperating with Washington as it shifts troops between its bases in Germany--the command headquarters for its European troops--and the Middle East. German troops are providing security at the bases as U.S. forces--normally standing at 70,000--are reduced by the war buildup.

Nevertheless, the war of words between the two imperialist governments has, if anything, sharpened, with U.S. officials proving the aggressor on this front as well. On February 5 U.S. Secretary of Defense Donald Rumsfeld, who in January had referred to France and Germany as part of "old Europe," delivered another sideswipe at the European power.

Speaking before the House Armed Services Committee on February 5, Rumsfeld claimed that most governments were falling into line with Washington in the war drive with the exception of "Libya, Cuba, and Germany." His lumping together of the European imperialist power with the north African semicolonial country and the revolutionary workers state in the Caribbean--both of which have been the target of U.S. sanctions and military attack--caused immediate controversy in Germany.

"Germany is and remains a reliable alliance partner," said Klaus Naumann, the former chairman of NATO’s military committee. "That’s not the way to treat partners."

Antiwar protest leaders in Munich called demonstrations against Rumsfeld’s visit there on February 7. "These comments of Rumsfeld should help bring more people out onto the street," said one organizer, described as a member of an antiglobalization group.

Although Rumsfeld struck a more conciliatory tone following the controversy, Richard Perle, an advisor to the Defense Department, hinted strongly that he would like to see the Schröder government replaced. "After the way the current government has treated the Untied States, repairing the damage in the near future is unlikely," he told the Handelsblatt business daily. "With a new government that would certainly be possible."  
 
 
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