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Last Updated: Monday, 21 November 2005, 19:20 GMT
Germans split over Merkel plans
By Catherine Miller
BBC News, Berlin

The flags and posters in Rolf Homeyer's office at the Nexans cable factory in Hanover declare the power of the trade unions to take on industry and win.

Rolf Homeyer in his Nexans office
Rolf Homeyer: Disillusioned with outgoing Chancellor Schroeder
But in the 37 years that the IG Metall union member has worked in the plant, he has watched the number of workers fall from more than 3,000 to under 400, stoking the 15% unemployment rate in the city.

Hanover is the heart of Gerhard Schroeder's powerbase of Lower Saxony.

The Social Democrat led the regional government in the 1990s and voters there returned him to parliament again this election.

In the past, says Mr Homeyer, Mr Schroeder was a good friend to the unions, but as chancellor, his recent reforms have been puzzling and disappointing.

"From the point of view of a trade unionist and a worker, there were a lot of mistakes. In Schroeder's last administration there were decisions I didn't understand, for example, the top level of tax was cut from 49% to 42%. I think people with those salaries can afford to pay 49% tax."

Mr Homeyer, who turned to the newly formed Left party this election, will shed few tears for Mr Schroeder.

Coalition angst

But he fears that the grand coalition government of Social Democrats (SPD) and Christian Democrats (CDU) under the new conservative Chancellor-designate Angela Merkel may be even worse.

"I don't expect very much from the new government. I hope at least that the CDU won't be able to push through all the plans it had in its manifesto, but in terms of economic policy nothing much will change.

"With unemployment at over 4.5m, it's vital for the government to do something about that. But I'm not sure that the proposals - like raising VAT by 3% in 2007 - are going to do much to achieve that goal."

His neighbours in the working-class suburb of Vahrenheide, Harry and Heide Marie Grunenberg, are still SPD stalwarts.

But in the last three years, Mr Grunenberg has been frustrated by the way many of Chancellor Schroeder's policies were blocked by the upper house of parliament.

"Since the election, I've started to think that the huge problems we have - health, pensions, unemployment - can only be resolved by a grand coalition. And when I look at the coalition agreement, the Social Democrat elements shine through very strongly, so I think we can be quite happy if they are really taken up and implemented".

Manja and Bert
Manja and Bert: Hoping for job security in a struggling region
But Mrs Grunenberg, a carer at an old folks home, fears for the impact of the CDU-led government on the family.

"Obviously there'll be the economic effects of the rise in VAT, then our daughter is at university, so we'll feel the impact of tuition fees. And I can see big changes at work, because care of the elderly is going to change. "

Eastern woes

The town of Stralsund on the north-east coast is rural and remote. Unemployment in Angela Merkel's constituency in the former GDR is over 18% and the former Hanseatic trading post relies on its historic old town to draw tourists and money.

Bert Linke and his girlfriend Manja Heinath live in a smartly renovated apartment block in the town centre. Bert has set up a small business advising firms on how to improve customer services.

"The economic situation in the region is the worst in Germany - it's on a level with Portugal. So it's difficult to set up business here, especially in a field where you rely on big companies, because there just aren't any here, so we have to look at firms from all over Germany and even international firms for our business."

He voted for the tax-cutting Liberal FDP party, traditionally the junior partner to the CDU. They have been left out of the government, but he hopes some of their policies will be taken up.

"I hope that under the new government conditions for medium- and small businesses improve. Taxes should be cut, everything should be simplified, the economic structures should be relaxed.

German Chancellor-designate Angela Merkel (centre) of CDU, SPD chairman Matthias Platzeck (left), CSU chairman Edmund Stoiber (right)
Mrs Merkel's coalition will have a huge majority in the Bundestag
"About 80% of jobs in Germany come from small and medium-sized businesses, but there's an imbalance because big industry gets a lot of support while the rest of us are neglected.

"I think it's important that the new government is at least talking about small business - whether anything really happens is another question."

Welfare targeted

Manja has a degree in business studies but is unemployed and does a few shifts a week at a directory inquiries call centre to bring in some cash.

The job centre has put her forward for a job at a car dealership but the salary is only 400 euros (274) a month - the maximum an employer can pay before he has to start making contributions towards health and pension insurance.

"Long-term it's obviously not in my interest to work on that basis because I have to pay the health insurance myself. I'll be 30 next year, which means that my contribution goes up to 130 euros - so I've got to ask why I should go out to work for 400 euros?"

She thinks the Schroeder government's reforms have made the job market worse not better, pushing down wages where there is high unemployment and increasing the gap between rich and poor.

She feels that unemployment has to be tackled by stimulating the economy, not by changing the welfare system.

Under Chancellor-designate Merkel, she hopes, better times may arrive - particularly for Stralsund.

"I was really pleased that she's become chancellor - and I think she won't forget where she comes from. I hope she does something for the region, so that the economy improves and big companies set up shop here. Maybe for once there's a chance that the economy will start to work better for us up here too. "

Hear Germans comment on the new coalition on BBC Radio 4's The World Tonight, at 2200 GMT on Tuesday 22 November.

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