The 1960s mark a dividing point in the history of the Western world. The old generation in government was passing; the welfare state had come to provide a safety net; a university education was no longer the preserve of the privileged few; the young were freed from sexual taboos and fears, and they discovered a new sense of identity and mission: romantic, idealistic, searching for a cause more worthwhile than crass materialism in a secular age. That similar feelings were burgeoning in the Soviet-dominated East becomes clear from events in Poland and from the Prague Spring, but for the most part repression kept the lid on free expression. In the US, university students on the eastern seaboard in particular identified themselves in the 1960s with the civil-rights cause of black people, though in this context they had the support of a new-generation president in J. F. Kennedy. Elsewhere the old generation was still in control, typified by de Gaulle in the Elysée. In the US the promise of the Kennedy years ended with the president’s assassination. Vietnam increasingly blighted the lives of youth, of the conscripts sent to fight on the other side of the world; the war became the focus of a new student protest movement and aroused general disillusionment with the honesty of those who governed. For the West German youth there was the added trauma of the question ‘What did my parents do during the war?’. The almost total silence in their country about the Nazi past only widened the gulf between the generations. As the active protesters in Berlin, Hamburg and Frankfurt saw it, the ‘grand coalition’ of Kiesinger–Brandt was a cynical closing of the ranks of the establishment. There was a short-lived resurgence of the extreme right, a switch of voters from the CDU, for whom the coalition with the Social Democrats was repugnant. Far more substantial was the movement by those on the left who could not stomach the coalition for exactly the opposite reason and felt disillusioned by Willy Brandt’s political manoeuvres. This discontent was fanned by the stirring news of student riots in Paris and throughout the Western world. Self-styled international student leaders emerged and became cult figures. The protesters were right about some of the causes they espoused – the need for practical reforms in the universities, for example, or the campaign against excessive police repression, which threatened civil liberties – but they were naive to suppose that they could spearhead a Trotskyist or anarchistic revolutionary movement. They themselves were mainly the offspring of the better-off, privileged professional and middle classes, and workers in Germany, France and Britain felt little sympathy for them and less urge to identify with their manifold causes. What gave the student rioting such potency, nevertheless, were the television cameras transmitting into millions of peaceable sitting rooms scenes of blazing petrol bombs and charging policemen. The single event that provided the spark and allowed the ultra-left to capture the student organisations was the brutal reaction of the Berlin police to students demonstrating against the visit of the Shah of Iran. On 2 June 1967, a policeman shot and killed an unarmed student, who at once became a martyr. Street battles followed in several German cities. But the student movement had no alternative to offer to German society; no extreme leftist movement could evoke mass sympathies with the spectacle of communist rule in the East before everyone’s eyes. Did the student movement, then, achieve anything beyond the reform of its own nest, the universities? It probably strengthened the feeling that there was a need for change; some politicians like Willy Brandt, leader of the SPD, understood that here was a new electorate, a new generation to be listened to and reconciled to the democratic institutions of the Federal Republic created by the old founding fathers. By the time the general election was held in September 1969, the grand coalition had fallen apart. The SPD had substantially increased its share of the vote, the German economy having recovered under the guidance of a Social Democratic minister working in tandem with Franz Josef Strauss, thus ridding them of their ‘red’ image. The CDU/CSU, nevertheless, remained the leading party; its partner, the FDP, lost heavily and now switched its support to the SPD, which under the leadership of Willy Brandt offered a fresh direction in foreign policy. Together they formed the new government. It was the start of a new period of SPD–FDP rule. In this way, the system of proportional representation had in 1969 placed the party with the largest number of votes, the CDU/CSU, into opposition; by far the smallest of the three parties, the FDP, had decided which of the two major parties was placed in power. With less than 2 million votes, and barely passing the 5 per cent threshold necessary to gain representation, the FDP had brought about a decisive change by switching sides. The working of democracy under proportional representation has its critics, but that a change of government was made possible had strengthened parliamentary government in the Federal Republic. The Federal Republic now had its Kennedy in the charismatic Willy Brandt, a youthful 55-yearold. He had played no part in Nazi Germany, emigrating in 1933 when only nineteen years old. He had lived in Norway and eventually fled to Sweden. In 1947 he resumed his German citizenship and ten years later became a courageous mayor of Berlin, championing the rights of the Berliners. His anti-totalitarian and anti-communist credentials were impeccable. A long period of office appeared to stretch before him especially after the electoral victory in 1972, which for the first time made the SPD the leading party. But his trust in a refugee, Günter Guillaume, originally from East Germany, who served on his staff and was privy to state secrets, proved to be misplaced. Guillaume turned out to be a spy and Brandt, accepting responsibility, resigned in 1974. But it had been a remarkable five years, not least for the new direction he had given to the Federal Republic’s relations with the Soviet Union and its Eastern neighbours, a policy known as Ostpolitik. Brandt contributed to the climate of detente between East and West; he was not simply reacting to it. A quarter of a century after the end of the war, he believed the time had come to normalise relations in central Europe. The Federal Republic’s refusal to recognise the ‘other’ German state, the German Democratic Republic had prevented all negotiations with the DDR which might ease the hardships inflicted on families by the division of Germany. In 1954 Adenauer had solemnly pledged that the Federal Republic would alter no frontiers by force of arms, but that pledge had been given only to the Western allies. The Federal Republic’s claim to speak for all Germans, its refusal to recognise annexations by Poland east of the Oder–Neisse (Silesia), the talk about ultimate reunification and its strident hostility to communism, all made it appear that the Federal Republic was a threat to the security of the German Democratic Republic and Poland if given half a chance. Such views of an aggressive West German state did not reflect reality either. Periods of detente in East–West relations have succeeded particular crises. The Soviet invasion of Czechoslovakia in 1968 was followed by a decade of diminishing tension and bridge-building. Brandt’s policy of accepting the existing frontiers of the Federal Republic and recognising the German Democratic Republic required West Germans to overcome a deep psychological barrier and to sever certain links with the past. But, eventually, the eastern territories were juridically abandoned and the legitimacy of the German Democratic Republic accepted. The foundation of the Ostpolitik rested on five treaties. In August 1970, Brandt travelled to Moscow, as he said, ‘to turn over a new page of history’, and he called for an end to enmity and for a partnership between the peoples of Eastern and Western Europe. After signing the Soviet–German treaty, he visited Warsaw in December 1970 to conclude a Polish–German treaty. Television cameras recorded for all the world to see Brandt’s act of repentance, when as the federal chancellor he spontaneously sank to his knees before the memorial to the half million Jewish victims of the Warsaw Ghetto. The gesture graphically symbolised the new Germany and its acceptance of responsibility for the Nazi past. A four-power agreement over Berlin (September 1971), a treaty between the Federal Republic and the German Democratic Republic (December 1972) and finally a Czech–German treaty (December 1973) completed the clutch of Eastern treaties. Visiting the German Democratic Republic in March 1970, Brandt laid the foundations for a new businesslike relationship. The Berlin Wall, constructed in 1961, had stemmed the haemorrhage of population loss from East Germany and in this negative way had created a basis of forced stability for nearly thirty years. But the masters of the German Democratic Republic were alarmed at Brandt’s popularity. Even after the treaty was signed, inter-German relations were far from normal. The viability of the East German state rested on Soviet support, specifically on the Soviet veto of union with the West German state. Brezhnev had, nevertheless, responded to Brandt’s overtures and forced the East German party boss Ulbricht to reach agreements. Western recognition of the Eastern settlements was worth a great deal to the USSR in stabilising its hold over the East. The boost given to inter-German trade, in addition, supported the ailing Eastern economies; Brandt’s Eastern policy also brought international recognition and benefits for the Federal Republic, chief among which was the recognition by the Soviet Union of the permanence of the ties between the Federal Republic and West Berlin. Moreover, movement between the two Germanies was eased. Brandt had thus extricated his country from the increasingly damaging Hallstein Doctrine whereby the Federal Republic had cut off relations with any state that recognised the German Democratic Republic (except for the Soviet Union). This had increasingly narrowed West Germany’s room for manoeuvre; now the way was open again for renewed trade and cultural relations with Eastern and central Europe. By taking the initiative, the Federal Republic was showing the world that it was no longer content with its inferior status, an ‘economic giant but a political dwarf’. Willy Brandt and his FDP partner Walter Scheel also proclaimed a new era at home. Farreaching reforms were promised which would deepen the attachment of every citizen to the democratic order. The perception of government by a remote elite, leaving the electorate either acquiescent or in open rebellion, was to be radically changed. The youth rebellion burnt itself out; under Brandt’s guidance, the SDP became more tolerant of its young socialists. He also hoped to provide an umbrella under which views from left to right could all shelter, though more often than not left and right fought each other within the party. That was to remain the SPD’s abiding problem, the price paid for the wide electoral support necessary to establish itself as the senior party of government. The Brandt government fell short of fulfilling its high aims at home. Between 1969 and 1975, the business cycle had turned downwards and the annual growth of the German economy fell from 8 to 1 per cent, a fall that was particularly steep after the huge rise in oil prices in 1973–4. The ‘economic miracle’ appeared to be over; the West Germans could not escape the depression of the 1970s. Brandt’s successor was Helmut Schmidt, the most able SPD chancellor of the post-war years. Practical, energetic and decisive in leadership, he provided a vivid contrast to the idealistic and emotional Brandt. But he did not suffer fools gladly and he made many enemies, especially among ideologues. His principle was to find pragmatic solutions to existing problems and to get things done. He inherited the downturn of the economy and the consequences of the oil shock – severe depression followed in 1974–5. The Schmidt government managed to keep inflation below 6 per cent. To Germans inflation was akin to original sin. But government measures to encourage efficiency and competitiveness to maintain full employment were only partially successful; even so, unemployment was kept down to between 4 and 5 per cent. Falling economic growth did not permit grandiose social-reform schemes to be realised, but budgetary cuts and financial rectitude kept the German economy in much better shape than that of its neighbours. Schmidt, a ‘European’, recognised the interdependence of the Western world and worked in close collaboration with the French president Valéry Giscard d’Estaing. The Schmidt years were severely strained by an upsurge of terrorism. A prominent German industrialist, Hans Martin Schleyer, was kidnapped in 1977 and then murdered when Schmidt refused to meet the terrorists’ demands. It was just one of a series of abductions and murders. That same year in October a Lufthansa jet with eighty-six passengers was hijacked by Arab terrorists to Mogadishu, where a specially trained German force spectacularly freed the victims. Fortunately, the wave of terrorism abated without having turned the Federal Republic into a police state. Schmidt’s period in office required almost continuous crisis management. In foreign affairs he was particularly concerned about the rapid buildup of Soviet missiles aimed at Western Europe just when the US and the Soviet Union had reached an agreement on balancing their intercontinental missiles. Schmidt saw two dangers: either that the US might decouple from Europe in the event of a nuclear threat, or, more likely, that a third world war would be fought in Europe. Then there would be nothing left of Germany. Until the Soviet Union disarmed its European missiles, the only response was to build up Western missiles in Europe as a deterrent. But Schmidt had a hard time getting President Carter to pay much attention to the issue. In December 1979, with Schmidt a leading advocate, NATO took the ‘dual track’ decision: there would be a period of negotiation designed to persuade the Soviet Union to withdraw its European missiles completely (the zero option) or to reduce them, and if this made no progress NATO would respond by stationing US missiles in Europe; the most dangerous of these, the Pershing missiles, would be based in the Federal Republic. The incoming Reagan administration was not keen on this deal, or any serious negotiations with the Soviet Union. Off-the-cuff remarks by administration spokesmen that a ‘limited’ nuclear war in Europe was feasible made the situation worse. Schmidt’s role and the NATO decision produced a powerful resurgence of protest outside parliament and strong opposition within the party. But Schmidt persevered. Reagan took up the zero option in November 1981, without results. Two years later in 1983 the US began its missiles build-up to match the Russian arsenal, thus setting out on a path that led eventually to the Soviet–US treaty abolishing intermediate- and short-range missiles, signed at the Washington summit in December 1987 by Reagan and Gorbachev. This success owed much to Schmidt’s original clarity of vision, steadfastness and courage in following an unpopular policy that at the time was characterised as an irrational twist to the dangerous nuclear-arms build-up. When Schmidt sought a renewal of his mandate as chancellor together with his coalition partner, the FDP, now led by Hans-Dietrich Genscher, the foreign minister, in the general election of 1980, he faced as the CDU/CSU candidate the able but mercurial Strauss, whose right-wing politics thoroughly alarmed the liberal reformers. Although the economy showed no signs of improvement – indeed, with rising inflation, rather the reverse – the Schmidt coalition beat the CDU/CSU. The SPD had held its share of the vote at 42.9 per cent, the FDP had increased its share to 10.6 per cent, and Strauss had lost votes compared to the CDU/CSU’s results four years earlier. Schmidt seemed set for a long period in office, but his health had been undermined, and the increasingly uneasy coalition with the FDP finally fell apart in 1982. The economic situation had seriously deteriorated throughout Western Europe. In the Federal Republic unemployment rose to over 7 per cent and the FDP was demanding cuts in government spending on unemployment benefit which the SDP could not accept. The FDP now once more switched its support to the CDU/CSU, and with Genscher’s support Helmut Kohl became chancellor in October 1982. It was largely the economic situation that had finally beaten Schmidt, though the fault lay not with his policies but with a world recession, which actually affected the Federal Republic less badly than its neighbours. At times of perceived economic crisis the majority of the electorate turned more conservative. Kohl won the 1983 election by a handsome margin. A new phase of CDU/ CSU–FDP government began. Unemployment rapidly increased as the coalition fought the recession with sound money policies, as the rest of Western Europe was doing. The most significant feature of the Federal Republic’s condition, however, has proved to be its stability in difficult times. Unlike the Germans under Weimar, the vast majority of today’s electorate have no wish for radical change. The new SPD leader, Hans-Jochen Vogel, moved his party slightly to the left but failed to capture the Green constituency. The new protest party, the Greens, who made their debut in 1979 and won an astonishing 5.6 per cent of the vote, giving them twenty-seven seats in the Bundestag, represent a mixture of left-wing causes and concern for the environment. They struck a genuine chord and on environmental issues continue to exert a wholesome influence, despite their eccentric behaviour in and out of parliament and their lack of unity. They have added a refreshing touch to the rather staid and mature democratic republic that West Germany has thankfully become. Extremism failed to win sufficient electoral votes to gain any seats. Terrorism remained a worrying feature of social life, but in one form or other it had become common throughout Western Europe, the Middle East and many regions of the world. Kohl’s chief problem was to satisfy Franz Josef Strauss, his CSU coalition partner and prime minister of Bavaria, who on most social issues stood well to his right. Genscher wished to retain the Foreign Ministry and was to become almost a permanent holder of the office, but Strauss also wanted to become foreign minister. In the end Kohl got the upper hand and Strauss was thwarted – but he had no other home to go to. The two issues dominating the administration from 1983 to 1987 were the economy and East– West relations, which centred on the stationing of nuclear missiles in the Federal Republic to match the Soviet build-up and, it was hoped, pave the way to comprehensive disarmament on both sides. But for a while another unexpected political development, the Flick affair, overshadowed politics at home and worryingly raised questions about the health of Germany’s democracy. A large group of companies was controlled by a senior manager of the Flick concern. He was accused of bribing the CDU, SPD and FDP parties and individual politicians. The FDP economics minister Count Otto Lambsdorff had to resign in June 1984, as did the chairman of the CDU and the speaker of the Bundestag after accusations of involvement. But, on the positive side, economic recovery began in 1984 and continued steadily until 1987. Inflation fell to its lowest rate in decades; in 1986 there was none at all. Exports boomed and the trade surplus grew larger. For the great majority in work all this promised continued stable prosperity. But the black spot was unemployment, which hardly improved. Nine per cent of the workforce, more than 2 million people, remained without a job. What was true of other Western countries was true of West Germany: even as the majority were increasing their standards of living, a heterogeneous underclass was forming. These were the ‘classless’, below any recognisable class: immigrants who could find no place in Western society, who were either unemployed or illegally employed at sweated wages, the mentally sick without family ties, drug addicts and prostitutes, some little more than children, haunting such areas as Bahnhof Zoo in Berlin. Then there were those sleeping rough in cardboard boxes, for example under the arches of London’s Waterloo railway station. Few were aggressive – the squatters in Hafenstrasse in Hamburg were something of an exception. In many cities unemployment was unacceptably high, but the social climate of the 1980s had grown altogether more harsh; economic health was the priority. Governments encouraged enterprise and productivity in industry, and the devil catch the hindmost. So the safety net was beginning to show large holes. Ecology, the health of the earth, became a growing concern. In Western Germany especially, a sizeable part of the community rebelled against a society that put material interests above all else and was therefore damaging the environment. There were ever more cars, and forests were dying from acid rain. Governments began to take notice and to discuss measures to reduce pollution. The Chernobyl disaster in 1986 sensitised people to the dangers of nuclear reactors. The Greens benefited as the anti-nuclear party. There were violent clashes between protesters and police at the sites of two nuclear reactors being built at Wackersdorf and Brokdorf. The government defended the nuclear-energy option, but this was really the end of nuclear expansion in West Germany. France, meanwhile, took the opposite course. West Germany was characterised during these years by an altogether more active public ready to join mass protests on issues that moved them. The protesters were no longer only young people and students, as they had been in the 1960s. It was a welcome sign that Germans were no longer awed by authority and bureaucracy, as they had been in the bad old days of the 1930s. The Pershing missiles based in Germany were the cause of continuous and widespread protest. But Genscher’s diplomacy maintained West Germany on a shady path, keeping Franco-German relations in good repair, behaving as good Europeans in the European Community and particularly normalising relations with the East German regime. While reunification remained the official line, few at that time believed they would see it happen in their lifetime. So the West German government set itself the task of overcoming the unnatural divisions caused by the Wall and concluded agreement which made travel between the two Germanies easier. The East German regime was much aided by the flourishing trade with West Germany, which also gave its neighbour large credits. With unemployment high, every legal effort was made to stem the number of asylum-seekers, other than Germans from the East, wishing to enter the Federal Republic. The Gastarbeiter were not as welcome as before, and Turkish families who had lived for years in West Germany were encouraged to return by the offer of a federal grant. Few took advantage of it. As election day in January 1987 approached, the Kohl administration could count on solid support from the electorate, which was enthused by the expanding economy and prepared to overlook the unemployment. Genscher was popular too; he enjoyed a reputation as a skilful and successful foreign minister who was covering more air-miles than any of his predecessors. Kohl was rather underrated, as it turned out, and was regarded as stodgy, with an unfortunate flair for putting his foot in it. That the television stations repeated his 1985 Christmas address in 1986 by mistake seemed a typical mishap. A more serious incident occurred during Reagan’s visit in May 1985. To mark the anniversary of the ending of the Second World War, as a gesture of reconciliation the US president and the federal chancellor paid their respects at a German military cemetery, but the choice of Bittsburg was unfortunate, because it contained many SS graves. There were protests, and Reagan was embarrassed. Kohl made another gaffe in 1987 when he likened Gorbachev’s propaganda to that of Joseph Goebbels. But in truth these were really just minor embarrassments. No one would have believed how surefootedly the chancellor, with Genscher’s help, would overcome the obstacles of reunification as the decade drew to its close. The election for the Bundestag in January 1987 gave the CDU/CSU 223 seats and a 44.3 per cent share of the votes, the FDP coalition partners secured 46 seats with 9.1 per cent of the vote and the SPD 186 seats and 37 per cent of the votes. The Greens advanced spectacularly with 42 seats and 8.3 per cent of the votes; no other party secured even 1 per cent of the vote. Support for extremist parties such as neo-Nazis was insignificant before unification. In 1989, West Germany, on the occasion of the fortieth anniversary of the foundation of the Federal Republic could feel it was prosperous, mature, and that democracy was firmly established. They could look confidently to the future unaware of the problems that lay ahead. The years from 1987 to 1990 were dominated by the question of the two Germanies and their relationship. It ended surprisingly with their sudden reunification (see Chapter 76). Kohl benefitted from the gratitude of the Germans in the east who helped him to secure a convincing victory in the general election in December 1990. The derelict state of the new federal Länder in the eastern half of Germany, an economy that had already faltered in its trade with the communist bloc and then in 1990 was unable to meet Western competition, a German workforce whose productivity was low after decades of the communist command economy – all these created far deeper problems for the Western half of Germany than was anticipated by the Kohl government. Kohl had promised to revive the east without raising taxes. The DDR currency was exchanged, within certain limits, on a ratio of one to one with the sound West German mark. To do otherwise, the Kohl government had feared, would have stimulated a mass migration to the prosperous Western Länder. Aid had to be poured in speedily to narrow as quickly as possible the gap between the standards of living, pay, salaries and pensions between east and west. Even so, more than 300,000 Germans moved from the east to the west in the year after unification. The difficulties, the costs and the time it would take to raise the eastern economy to Western, free-market standards were badly underestimated. Kohl’s forecast during the 1990 election campaign of ‘blossoming landscapes’ in the east by 1994 was soon regarded as unlikely to be fulfilled. His undertaking that ‘nobody after unification will be worse off’ was rapidly abandoned. Despite the billions of Deutsche Marks poured into the eastern Länder and despite efforts to privatise state industries, the majority of Germans living in the east continued to face severe problems. Material benefits still lay in the future for 3 million workers, one-third of the workforce in the east, who were unemployed or on special programmes designed to mask the true extent of unemployment. Disillusionment and frustration led to growing support for extremist groups, even for neo-Nazis. Anger was turned on the hapless foreign asylum-seekers who had taken advantage of Germany’s hitherto generous immigration provisions – 190,000 had entered in 1990 and 250,000 in 1991. The fire-bombing of hostels and violent demonstrations shocked democratic opinion in Germany and the West, but unemployed eastern Germans continued to resent the help given to foreigners, which they claimed deprived ‘fellow Germans’ of their due. After half a century of brown and red dictatorships, this was evidence of a distinct deficit in ethical values. The number of foreign immigrants was actually less than the number of ethnic Germans who had lived for generations in the Soviet Union and Eastern Europe and had now migrated to Germany. They had been encouraged in quite different circumstances, before unification, to come back to the land of their great-greatgrandfathers. During 1990 and 1991 alone, almost three-quarters of a million took advantage of this opportunity. One of the consequences of recession and of pressure to enter the West was that efforts to halt the flow began to play an increasingly important role in German and in West European politics. Former citizens of the DDR in the 1990s had to make many painful adjustments before they could expect living standards comparable with those in the West. Some lessons were psychological, such as not waiting to be told what to do but taking the initiative; others were more practical, such as adapting to the needs of the market, working effectively to raise productivity and learning the skills of market management. Another hurdle was to overcome the corruption of the past, the evidence of which lay in twelve miles of files in the former secret police (Stasi) archives. These preserved denunciations by tens of thousands of informants who had reported on their neighbours, employers, employees, teachers and students. It was not easy to accept that the old system could not be divided into the good (such as the guarantee of employment) and the bad (such as the Berlin Wall), that a government and society have to be judged as a whole. It was difficult for East Germans not to be resentful of the West Germans who came over to patronise them and fill the best managerial posts; and it was hard for them to have to wait for an indefinite number of years for the promised land of plenty. Meanwhile in West Germany there was resentment about the sacrifices necessitated by the transfer of money to the east, the higher taxes and high interest rates. The East Germans were blamed for their own plight, for their unrealistic expectations of achieving overnight what had taken the West Germans decades to accomplish. The shock to the economic system of providing aid for 17 million East Germans was felt throughout Europe. High interest rates slowed down hopes of recovery in France, Britain and the rest of the European Community. Germany could no longer act as the powerhouse of trade and lift the Community out of recession. Unemployment in the Community was running at around 10 per cent and in some countries was even higher in 1992. Europe in the early 1990s was mired in recession, instead of enjoying the expected ‘peace dividend’ from the collapse of communism. The former Soviet Union stood on the edge of an economic abyss. The enormous German effort to transform had begun to show results. Islands of industrial revival as around Dresden are developing, but much of the eastern Länder are in a sorry state, the young and enterprising moving west. The east and west remain economically, socially, psychologically divided. For two generations Germany’s formula for prosperity and stability has been to follow consensual policies between three partners – the state, the employer and the employee. Deliberately reversing the structure of the Nazi state with its slogan, ‘one country, one people, one leader’, post-war Germany ensured that decision-making was distributed by a federal structure of checks and balances. This has made it difficult to change fundamental polices such as rigid labour laws and generous state benefits, which place heavy burdens on employers and tax-payers. Labour became too expensive, so foreign workers were brought in legally or on the black economy, investment in technology to replace labour was increased, and products were manufactured outside Germany; all these factors drove unemployment up to the highest levels since the 1950s. In 1997 the first signs of recovery became apparent. An artificially low rate of exchange favouring exports helped German industry to increase productivity, but even then employment was slow to pick up. The bankrupt eastern Länder of the former German Democratic Republic were another German drain on resources. Despite the transfer of over DM900 billion of West German tax-payers’ money there are still not enough modern factories and services to provide work; unemployment is even higher in the east than in western Germany, with more than one in seven out of work. Kohl’s vision of ‘flourishing landscapes’ proved to be a sad delusion; the gap between east and west will not be closed until well into the new millennium. In the face of all these problems, German democracy has remained solid. The post-war racist excesses of extremists have been confined to a minority and condemned by the majority. The Kohl era came to an end in 1998 after sixteen years in power. Internationally they had been years of achievement and success. Kohl was credited with unifying Germany, gaining the trust of its Western allies and the Soviet Union, presiding over a mature democracy. The Bundestag elections saw the CDU and its Bavarian CSU partners garner the gratitude of the population in the east and substantially raise its vote in 1994. But over the next four years the Kohl chancellorship no longer looked unassailable. German exports were suffering. The generous social provisions, pension rights, protection of the workers, the cost of subsidising the new eastern Länder, were exacting their toll on the economy. The economy was stagnant and unemployment rose to 4.2 million or about 11 per cent of the workforce. Social welfare and unemployment payments were generous. Germany was mindful of the last Weimar years. Schröder campaigned in 1998 promising to reduce unemployment from just over four million by a modest half a million during his period as chancellor. The CDU vote fell especially precipitously in the eastern Länder where employment was exceptionally high, excommunists and the SPD benefited. There was also an alarming rise among the young for antiimmigration racist neo-Nazis. Overall, the SPD in coalition with the Greens were able to form a coalition under Schröder with a convincing majority in the Bundestag. Early on, Schröder appeared to be on target to make good on his promise to reduce unemployment. The international value of the mark fell, or rather the euro declined in value. On 1 January 1999 the Monetary Union began and Germans gave up their beloved stable mark. Kohl had agreed to Germany joining and Schröder followed through. The boost given to German exports by this devaluation did not last. The problems were fundamental: inflexible labour, workers’ rights were well protected and making them redundant expensive for employers who were consequently reluctant to risk taking on too many. The welfare payments required high taxation; the unions were powerful and went on strike when their wage demands were not met. The unemployed did not have to accept jobs that were of a lower kind than what they had before. During the last years of Weimar longer term unemployment meant dire poverty and had paved the way for the Nazis. That was the ‘lesson’ learnt. But high taxes and social security were undermining German enterprise and the ability to adapt to change. Unemployment began to rise again. The opposition accused Schröder of breaking his promise to bring it down. In the autumn of 2002, with an election pending, unemployment had climbed back to over 4 million. It looked as if the SDP–Greens might well lose the general election of 2002 in a close-run contest. Three events revived Schröder’s chances. An astonishing scandal broke over the heads of the CDU and Kohl. The amount of money that could be contributed to political campaigning was limited by law. In the 1990s, the party treasurer admitted that large sums had been secretly contributed to party coffers by some businesses in return for favours. Kohl admitted knowing and was implicated. A criminal investigation into Kohl’s conduct began and was only finally halted on his agreeing to pay a substantial fine. Then during the summer of 2002 the Elbe burst its banks and caused horrendous floods. Schröder was seen everywhere in the affected regions, the concerned and active chancellor. Proposed tax cuts were postponed to help the stricken regions. The opposing chancellor candidate Edmund Stoiber was wrong-footed. Stoiber was prime minister of Bavaria and so in any case handicapped, but he was also stiff and lacked charisma, unlike Schröder. Finally there was the growing crisis with Iraq. Stoiber was diplomatic about Germany’s likely role, Schröder reflected the popular mood declaring that under no circumstances would Germany join in any war against Saddam Hussein. When the elections were held in September, with the CDU/CSU previously neck-and-neck with the SPD, both parties polled approximately the same votes, 38.5 per cent, but with the gains the Greens made, the SPD/Green coalition had survived. The popularity of Schröder was based on weak foundations. The aura of his robust stand against participating in the Iraq war could not outlast its conclusion for long. Fences with the US needed mending; especially with President Bush who took Germany’s abandonment of the alliance personally. But Germany had demonstrated once again that the people overwhelmingly opposed any military action beyond its own frontiers. It was reassuring for the rest of Europe how pacific the Federal German Republic had become, how European minded though, thereby opening a gap with Blair’s more realistic alignment with the US – but then Britain did not have to live down the Second World War. Schröder’s headache at home was how to get Europe’s biggest economy out of stagnation. The backing of his own party, split between the more centrists and left, is always problematical. At least he can count on the backing of his coalition partner, the Greens. The parliamentary majority of nine is dangerously small if some SPD members of parliament choose to abstain from backing the government. On the other hand, the small majority ensured more discipline. The party does not wish to face another election too soon which it would be likely to lose. During the previous summer of 2002 Schröder had assigned to a group of experts the ‘Hartz Commission’ – Peter Hartz at the time was the personnel director of Volkswagen – to come up with recommendations on reform in the economy. In the summer of 2003, the party backed Schröder’s reform plan which abandoned hallowed workers’ rights. Full unemployment pay would only be paid for one year instead of two years and eight months and then lower welfare rates would apply; laying off workers would be made just slightly easier, more flexibility in rates of pay would be introduced. None of these changes are earth shattering; the unique industrial feature of co-determination by workers and managers, however, was left in place. Reforms pointed to a new direction of the social compact of worker–employee relations and social welfare entitlements provided by the state for the people. The non-wage labour costs had exceeded 40 per cent – too high in a competitive international age, taxation was too steep and even so the budget deficit exceeded the 3 per cent limit set by the European Union’s Growth and Stability Pact. To lower expenditure, health entitlements would be pruned. Small independent businesses based on craft skills would also find it a little easier to establish themselves. There would be no sharp shock treatment as the very name given to the reforms ‘Agenda 2010’ revealed. It is all probably too little too late. German industry and services will need to find the creativity in a recovered world market to pull Germany out of its low growth rate and reduce unemployment to acceptable levels below 5 per cent, a reduction that in 2005 could only be dreamt about. Yet standards of living remain among the highest in Europe. Germany is not a country in crisis and government remains stable and democratic. The neo-Nazis remained on the fringe rejected by the overwhelming majority of people. The 2004 Länder elections starkly confirmed the continuing east–west split despite the 1.25 trillion euros transfer to build up the east since 1990. Unemployment and discontent is high benefiting extreme parties there on the left and right. A long and painful road of welfare and labour law reforms lies ahead to make Germany more competitive.