The set up of the new government took more than six weeks. This reflects the basic problem of both parties in the coalition: on the one hand, the main message of these elections was a clear No to neo-liberal adjustment and the Anglo-Saxon type of capitalism by the voters. Both parties admitted this. On the other hand, both parties had – in different intensity – advocated the neo-liberal project in the past and are willing to continue in this line. This contradiction constitutes a strategic dilemma for both and created difficulties beyond the normal problems of such an alliance.

The strategic dilemmas of the parties in government
The strategic dilemma is not only on the ideological and programmatic level but has structural roots in the electorate of both parties. The SPD lost, as a result of its neo-liberal policies, all regional elections in the last years. 200.000 persons (out of 800.000) left the SPD in the last decade. The historic alliance between SPD and trade unions (DGB) is eroding. Many of its traditional voters either abstained or went to the opposition, i.e. to the CDU in the last three years. For the first time in the September elections, 2 million former SPD voters voted for the new left party (Linkspartei). If the SPD simply continues the line of Schröder, the crisis of the SPD would continue. To conclude: the "New Labour" style of Social Democracy is in serious troubles.

The successes of the CDU in the last years in regional elections were an expression of the weakness of the SPD. Many voters of the SPD, in particular workers, voted CDU as protest against the neo-liberal policies, because the CDU occurred as the opposition to the government. With the emergence of the Linkspartei the protest voters have now an other alternative. At the same time, the traditional milieus, which constituted the social basis of the CDU since the fifties – catholic, conservative, artisans, rural, elder people – is eroding too. Compared to 1998 the CDU lost 2 million votes of elder people who died in the meantime. The CDU will remain structurally a minority party if they don’t reach new layers of the society. With a hard core neo-liberalism this is not possible.

The difficult negotiations - neo-liberal observers call it stagnation - are nothing else but expression of the socio-political balance of power in the society. There is a crisis of acceptance of neo-liberalism in the population, but an emancipatory alternative is not yet strong enough to replace the old paradigm. This makes the new coalition rather fragile and it is not sure, whether this government will be able to operate for the full term of four years.

A mitigated neo-liberal programme
The crisis of acceptance of neo-liberalism is also reflected in the programme of the government. They want to continue the neo-liberal transformation. But the speed and the depth are downsized compared both to the Schröder agenda and the intentions of the CDU. Business therefore was disappointed, complaining that the "reform process" was slowed down. The main measures in the programme of the new coalition are: increase of the VAT by 3%, thus going up to 19% (while livelihoods are exempted), cuts in pensions, cuts in subsidies (in some cases reasonable, in some others directed against the lower classes), further flexibilisation of labour laws and further tax reductions for companies. On the other hand they have introduced a "tax for the rich". This tax will generate 1,9 billion Euro, whereas the increase in VAT generates 16 billion. This shows that in substance there is still a tremendous imbalance. On the other hand they have at least understood that a too crying social and tax inequality creates political problems. However, this programme is to certain extend also cosmetics, but cosmetics with political effects: Thus the leadership of the trade unions has declared that they will "constructively co-operate" with the government and abstain from protests and mass demonstrations, as long the present line is not altered.

Economically very relevant is a strict austerity programme for the state budget Instead of trying an anticyclical approach this extremist neo-liberal dogmatism will continue to weaken domestic demand, increase deflationist risks and kill growth.

An important issue in the negotiations was the programme for the phasing out of nuclear power. The CDU did not succeed to turn the tide. The process of phasing out continues, as well as promoting alternative energy. This sector is commercially very profitable and Germany has become the leading exporter of these technologies in the world.

The balance of power between SPD and CDU is almost equal. The chancellor is under these circumstances relatively weak.

And the opposition?
The liberal party (FDP) is the strongest party in opposition. They will build pressure for more neo-liberalism. The Greens, now the smallest party in parliament, compete in some issues such as migration, democratic rights with the FDP. Given the impact of irreversibly increasing oil prizes and climate change, the greens have certain chances to play a role in the future. They have some competence in these issues. However, there are strong internal tensions regarding the future orientation. Some are in favour of a centre left government in some years together with SPD and the new left party, others advocate coalitions with the CDU. The outcome is open.

Perspectives of the new left party
The new left party (Linkspartei) is the big winner of the election. The candidature for the federal election happened under extreme time pressure and started from zero. One of the motives of Schröder, to hold the elections one year before the end of the official term, was to prevent the Linkspartei and its most prominent figure, former SPD president and finance minister Oskar Lafontaine, to enter the parliament.

However, the Linkspartei does still only exist as a fraction in the parliament. As a party it is still to be constructed out of the post-communist party PDS and a new initiative in the West from mainly trade unionists and former Social democrats. The PDS, which in the East are a strong force around 20%, are in the governments of the states of Mecklenburg Vorpommern and Berlin together with the SPD. In one ore two states they even might become the strongest party in future elections. There are differences in historical traditions and culture and the unification to one party is a complicated process. It is scheduled to last two years. The options that are discussed and controversial are whether the party should become a modern left party of the type of the Italian Rifundazione Comunista, or a traditional – not New Labour – social-democratic party.

The majority of the voters of the Linkspartei are either unemployed (1 million) or precarised, they are mainly male and between 45 and 55 years old. An important percentage are professionals in the new sectors such as informatics, telecommunication and other high tech services and people with higher education.

Given this social basis, the Linkspartei will have to develop considerable dynamics to maintain and to expand its electorate. On the other hand, the continuation of the neo-liberal policies will increase its attractiveness. The mainstream of the Linkspartei is oriented towards a centre-left coalition with the SPD and the Greens after the next federal elections.

In general the developments in Germany have become quite open. The new configuration opens windows of opportunities for emancipatory policies of social movements but is also full of new challenges. It is also an unstable situation and surprising turns in any direction cannot be excluded.

November 29, 2005.