Keeping German economy on the road

By Ray Furlong
BBC News, Frankfurt

Frankfurt Motor Show has provided a platform for Angela Merkel to stress how she has brought Germany through the world economic crisis

The unveiling of planned electric supercars by German auto-giants Audi and Mercedes; the menacing power, and price tag, of Lamborghini's 1.1m-euro (£1m; $1.6m) Reventon Roadster; Ferrari's 458 Italia coupe V8 sports car.

Frankfurt Motor Show - the world's largest - has provided an adrenalin fillip to the assembled leaders of a struggling industry.

It has also provided German Chancellor Angela Merkel with a platform to stress how she has brought her country through the world economic crisis.

"We've all had a pretty wild year," she said as the show opened last week. "The government thought first and then took action when the time was right.

"We implemented a stimulus plan… 80 billion euros were mobilised for 2009-10 and the automobile industry played a crucial role in the plan, reflecting its status as a key branch of the economy."

There was a warm welcome for Mrs Merkel from the executives in the audience. Illuminated in soft blue stage lights, Mrs Merkel was also basking in the afterglow of the deal with General Motors to save Opel - and indeed her government's wider efforts, via its scrappage scheme, to support Germany's vital car industry.

'Take the credit'

Seen from here, Mrs Merkel seems to be cruising to re-election.

When the rescue packages were approved for German banks she managed to sell this as being for the people Peter Mattuschek Forsa polling agency

"She's really popular you know," said Peter Verloop, retired former head of Suzuki Europe, and now a member of the presidium of the Automobile Club of Germany.

"I think at the moment there's nobody really in the starting block that can do better."

"This was a good opportunity for our government to show its capabilities," added another industry executive who did not want to be named.

"How they managed the crisis is a very good job. Merkel can take the credit."

Chancellor Merkel's response to the crisis has included elements familiar to anyone in Britain: a large fiscal stimulus and a bailout for troubled banks.

It has given her party a strong lead: in the latest poll her CDU/CSU had 35% support, compared to 26% for the Social Democrats (SPD).

Peter Mattuschek, from the polling agency Forsa, said her ability to sell these policies has been most important.

"The performance of Angela Merkel has been strategically quite intelligent," he said. "When the rescue packages were approved for German banks she managed to sell this as being for the people, giving people stability in times of turmoil."

But there have been protests and strikes, such as a four-day stoppage at car-parts maker Federal Mogul in Wiesbaden in May.

Unemployment down

The plant is now on a short-time working scheme - where, unlike in Britain, the workers receive state benefits to make up for most of their lost pay.

Merkel is able to take the credit for some recent good news stories

"The short-time working scheme is definitely a good idea," said Mustafa Errol, who has worked on the production line here for 10 years.

"The government scheme has saved jobs - and my standard of living has not suffered too much."

Mrs Merkel's government has extended the short-time scheme from 18 months to two years, a move widely credited with keeping unemployment down - until the election. That worries Mr Errol.

"The politicians are making nice speeches, but if they don't provide more help then there will be job losses here. Our short-time working runs out in June. If business doesn't pick up by then there will be redundancies."

He is one of the 24% of voters who are still undecided - and could provide an upset on election day.

Stimulus package

Meanwhile, Mrs Merkel's opponents say that she has merely identified herself with policies that others pushed for.

[Merkel] sees which proposal is received well by the media and makes it her point of view Ingo Kolf Labour market specialist

"The most active ministers in this have been Peer Steinbrueck [Finance] and Olaf Scholz [Employment] - both Social Democrats," said Hans-Ulrich Klose, an SPD MP since 1984.

"But the chancellor approved it, so it's hers. She's the chancellor, everything is to her benefit. You can't avoid that - that's what happens when you're the smaller partner in a coalition."

Ingo Kolf, specialist in labour market research at the DGB (Germany's trade union umbrella group) made a similar point.

"The stimulus package was put forward by Frank-Walter Steinmeier," he said, referring to the Social Democrat candidate for chancellor who is foreign minister in Mrs Merkel's government.

"It was his idea and Chancellor Merkel made it her point of view. She's rather tactical in her behaviour. She sees which proposal is received well by the media and makes it her point of view."

Politics or economics?

Naturally, the Merkel camp dismisses this. But even on her latest triumph, Opel, doubts are emerging.

Not only is there talk of challenges on a European level from Spain and Belgium, which like Britain stand to lose jobs if other GM factories close.

Merkel said she was "very pleased" about the GM decision

But it is reported that there will be more job losses in Germany than previously expected - although again, not until after the election.

Two of the German government's representatives at the negotiations with GM, Manfred Wennemer and Dirk Pfeil, have also cast doubt on the deal.

Mr Pfeil said it was based on politics rather than economics.

Despite the doubts, Mrs Merkel looks set to remain chancellor after the election. The only question is with whom she will rule.

Until a few weeks ago, it looked like she would be able to form a centre-right coalition with the Free Democrat party, which would pursue more radical economic reform in Germany.

But recent polls suggest she may lack the votes for this - and end up once again in a grand coalition with the Social Democrats.

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