The bosses need to reverse the German economy’s longtime stagnant growth rate, which stood at 0.8 percent this year, one of the lowest in the 25-member European Union. The September 18 elections had resulted in a virtual dead heat, with the CDU receiving only four more seats in parliament than the Social Democrats, reflecting divisions in the ruling class over how far and how fast to lead the antilabor offensive.

The outgoing SPD government of Gerhard Schröder had bumped up against the resistance of working people to cuts in unemployment benefits, in particular. The jobless rate is about 11 percent nationwide, and above 18 percent in the eastern part of Germany. The SPD’s Agenda 2010 plan reduced monthly benefits and forced the long-term unemployed to accept jobs paying one or two euros per hour (1 euro = US$1.17) in order to hold onto their benefits. Tens of thousands of people protested the measures in the summer of 2004.

Although Merkel entered office praising Agenda 2010 and similar SPD measures as “milestones which we want to work from,” she has dropped a number of her “labor reform” plans such as loosening region-wide wage bargaining.

However, the CDU-SPD coalition plans to increase the retirement age from 65 to 67. It also plans to strengthen the hand of the bosses on the job by lengthening the probationary period new workers face, from six months to two years. The government is also projecting a 3 percent increase in the sales tax that will hit workers especially hard.

German employers’ association leader Dieter Hundt complained, however, that these measures fall short of the “real bold stroke” the bosses need, according to Deutsche Welle, an online German news service.

Many in the big-business press, like Investor’s Business Daily, had “dared to dream” that a Merkel victory would produce a chancellor “like Iron Lady Margaret Thatcher in Britain.” The U.S. business daily expressed its dissatisfaction with the outcome in a November 16 editorial titled, “Angela’s Bad Beginning.” The new German government, it said, “had barely come into existence before it made its first big mistake—raising taxes.” In addition to the increase in the sales tax, the CDU-SPD government plans to increase the top income tax rate from 42 percent to 45 percent. The Investor’s editors warned that Japan was the last country to do so, in 1997, and “a nasty, deflationary recession followed.”

So far, it doesn’t appear that the new government is planning an anticipated shift away from Berlin’s alliance with Paris and toward closer ties with Washington and London. Antagonism between the two imperialist blocs reached a high point in the lead-up to the U.S.-led invasion of Iraq in 2003, when Paris and Berlin refused to send troops to join the “coalition of the willing.”

While visiting NATO headquarters in Brussels November 23, Merkel told reporters that German troops would train officers of the U.S.-backed Iraqi military, but not inside Iraq. “We will continue to conduct training in neighboring countries,” she said. “So there will be continuity with the previous policy.”  
 
 
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