Steady, Go!

It was billed as Germany’s first-ever political duel — a face-to-face, bare-knuckles debate between candidates for Chancellor in national elections Sept. 22. But despite their closeness in the polls and with just two months more of campaigning, the confrontation last week between Chancellor Gerhard Schröder and his conservative rival, Bavarian premier Edmund Stoiber, seemed more a polite dialogue than a political punch-up. “Herr Schröder promises a lot but delivers little,” complained Stoiber. “I consider [Stoiber] wrong for the economic, political and social development of Germany,” retorted Schröder.

The debate, which was held in private at the offices of the mass-circulation newspaper Bild — a transcript was printed over three days — also made clear there’s really only one issue in the campaign: unemployment. “The Chancellor has not kept his central promise to push unemployment under 3.5 million people,” said Stoiber. “He also made clear that he wanted to have himself tested on this promise and that he did not deserve to be re-elected if he did not fulfill it.”

Schröder’s promise to cut unemployment, made before the last election in 1998, is coming back to haunt him. Figures for June showed the number of jobless rose by 39,000. Seasonally adjusted, unemployment was above the politically sensitive 4 million mark, rising to 9.8% of the workforce, from 9.7% the previous month. At the same time, an effort by Schröder to arrange a bailout for Babcock Borsig, an engineering group with 22,000 employees, failed to win support of banks and the company was declared bankrupt, hurting Schröder’s image as an economic troubleshooter.

He has little choice now but to try to wriggle out of his unemployment pledge. “Anybody who believes himself to be competent with regard to economic questions should be aware of the fact that an economy that is as dependent on exports as Germany is far more affected by world- wide economic collapse than other economies,” Schröder told Stoiber.

“It’s quite obvious that unemployment will be the issue, and it’s dominating the debate,” said Peter Lsche, a political scientist at the University of Gottingen. “People think Stoiber is much more competent in economic affairs than Schröder, and that’s what counts. People vote with their pocketbooks.” Opinion polls last week were unanimous in giving the lead toStoiber’s alliance of the Christian Democratic Union (CDU) and its Bavarian sister party, the Christian Social Union (CSU). In one, the influential Forsa poll published in Stern magazine, voters were asked which party they would vote for if the election were held today; the CDU/CSU garnered 39% of votes and Schröder’s Social Democratic Party received 36%.Three other polls showed similar results.

Paradoxically, when pollsters ask people who they’d prefer as Chancellor, Schröder wins hands down by 44% to 29%. That reflects the failure of Stoiber’s spin doctor, former Bild Sunday editor Michael Spreng, to make the candidate appear less wooden. In contrast, Schröder is a natural, garrulous politician. Stoiber denied Schröder’s accusation that he is a nerd, saying instead that he is merely “industrious.” In return, Stoiber draws attention to Schröder’s three divorces, saying, “I will not allow others to discredit me because I am married to the same woman for 34 years.”

Stoiber is counting heavily on his solid reputation as a manager of Bavaria’s economy. The state has the second-lowest unemployment rate in the country, 5.3%, and has built a thriving high-tech culture by selling off state-owned companies and using the proceeds to invest in start-ups, especially in biotechnology. What’s more, Bavaria had the best test scores in a nationwide rating of grammar school pupils.

Stoiber won additional support by announcing plans to create a new super ministry combining economics, labor and responsibility for eastern Germany. He named Lothar Spaäth, the former premier of Baden-Wrttemberg, to be head of the ministry if Stoiber wins. Spaäth is the widely admired chief executive of Jenoptick, a high-tech manufacturer he helped create out of the ashes of East German industry. Stoiber said rebuilding the east is key to improving Germany’s economy. But the CDU/CSU’s support is weakest in the east.

Stoiber has proposed a sweeping economic reform cutting personal income-tax rates to below 40%, reducing the government share of GDP to under 40% and holding social contributions to less than 40% of wages, a program he calls “three times 40.” “We want the people in Germany to have more money in their pockets,” Stoiber said last month. “A lower burden of contributions and taxes results in higher incentives to do well.” Schröder complained that implementing the plan would cost the treasury j170 million, which he said the country couldn’t afford.

Despite Stoiber’s promises, the conservatives have not won unanimous support from big business, as might be expected from a center-right party. One reason is that Stoiber and his CDU colleagues have promised to overturn one of Schröder’s principal reforms: ending capital-gains tax on sales of shares by corporations. Stoiber contends the change was unfair to small and mid-sized companies that could not take advantage of it. But the measure is widely supported by the nation’s banks and insurance firms, which still have large cross-holdings in major German companies. Stoiber also said he was against adopting American-style regulations to free up the labor market, saying he does “not stand for hire-and-fire conditions in Germany.”

Stoiber criticized the government’s financial management, trying to blame Schröder for an 89% drop — from a peak in 2000 — in the share price of Deutsche Telekom, Europe’s largest phone company. Shares in the firm were widely purchased as a first-time stock market investment by many Germans. Stoiber complained that small shareholders had seen their investment evaporate while the company’s managers earned hefty salaries. Schröder lamely responded that the government owns only 43% of Deutsche Telekom’s shares and is powerless to set policy at the company or fire nonperforming executives.

In response to Stoiber’s economic plans, Schröder has come out in favor of a special commission’s findings on the unemployment challenge. The 15-member panel, headed by Volkswagen executive Peter Hartz, proposed making a large number of the jobless into virtual employees of state employment offices, which would act as temporary job agencies, placing people in short-term jobs. The commission said that unemployment could be cut in half if its proposals were implemented, and Schröder said he “liked the direction the overall concept takes.”

Schröder and Stoiber did not spend much time debating pressing social issues, such as Stoiber’s opposition to increased immigration or fears about crime. Stoiber at one point even said he had no differences with Schröder over foreign policy, a sign of remarkable nonpartisanship. The two candidates will appear in further debates — this time televised — in August and September. With poll results so close, both will be looking for new issues to help invigorate a staid campaign. Being polite doesn’t count for much in the heat of an election.