Andreas Tzortzis

Following a historic defeat in state elections that his party has traditionally dominated, Chancellor Gerhard Schröder has called for new federal elections this fall - a surprise move that will put the fate of his ambitious labour reforms for Europe’s largest economy in the hands of German voters.

The defeat of Schröder’s Social Democrats (SPD) in North Rhine-Westphalia, a state that had been friendly to the party for nearly four decades, is a neon sign of growing discontent with a reform agenda that critics say has so far delivered the worst of both worlds: cuts in the country’s welfare system and no major boost in job growth.

But Schröder stands by the reforms, and his call for elections - nearly a year ahead of schedule - means German voters will decide whether he, or the rival Christian Democratic Union (CDU), will take responsibility for Europe’s most populous country. More significantly, the vote will be a test for wider questions now roiling the continent: should Turkey be admitted to the European Union (EU)? And will Germany, like much of Western Europe, continue to balance socialist and capitalist ideals, or will it embrace the unbridled capitalism of fast-rising Eastern Europe?

Polls indicate that the majority of Germans say that their economic system, suffering under a 12 per cent unemployment rate and rocketing rates of public spending, is in need of serious change. But two years since Schröder launched his modern-sounding “Agenda 2010” programme with promises of more jobs and higher rates of investment, voters say little has changed. The rust belt of Germany was once brimming with factories and mines. Now its biggest cities have unemployment rates rivalling those of cities in Germany’s depressed eastern half. One million people are currently out of work.

CDU candidates played up the weak economic numbers in their election campaign, but they were careful not to promise anything. Analysts say that’s because they, and their likely coalition partners in the Free Democratic Party (FDP), will probably propose even tougher reforms. That’s why Schröder will push the CDU to offer more than criticism of his reform agenda.

The SPD will have to overcome party rifts as to how aggressive it should be in liberalising the labour market. A catastrophic split between the party’s leftists and those who support Schröder’s course was one of the reasons the chancellor called early elections. “He is worried that there will be serious inner-party fights over the reforms that could tear the party apart,” says Jürgen Falter, a professor of political science at the University of Mainz.

In the coming months, they will have to rally behind Schröder if they want to stay in power on the federal level. Analysts say Schröder, who routinely scores higher than the distant, is eager to take on his rival in an extremely personal, US-style election campaign. “Schröder is getting ready for a duel,” says Falter. “Because it will be so short, it will be less a topical campaign than a personality one.”— The Christian Science Monitor