Germany, Europe's largest economy, is at a political crossroads. Later this month, Germans will decide whether to re-elect long-serving Chancellor Helmut Kohl to an unprecedented fifth term, or replace him with his silver-tongued but so far maddeningly vague challenger, Gerhard Schroeder.
For Germany, and for the rest of Europe, the outcome involves more than personalities. At issue is whether either of the leading candidates can offer solutions to the fundamental problems that beset Germany's economy - the same problems that plague most of the major industrialized countries, particularly in Europe. Regrettably, neither candidate has been particularly inspiring.Indeed, the formidable incumbent, who has held the chancellorship for 16 years, has taken to crowing of late that Germany's economy is on the mend. Mr. Kohl points to lower unemployment and faster economic growth as signs that modest tax and labor-law reforms, which he pushed through the lower house of Parliament, are having a positive effect.
Unfortunately, the economic data are deceptive, and Mr. Kohl's claims are so much election rhetoric. The drop in unemployment is partly due to seasonal factors and to Mr. Kohl's make-work programs for the unemployed, which add to taxpayers' burdens. Moreover, at more than 10 percent, Germany's unemployment rate is nothing to gloat about: Outside forecasters expect it to remain above 11 percent for the next two years, despite average growth above 2.75 percent. Germany, in fact, is a textbook example of a country with a jobless recovery.
Mr. Kohl, at least, has a program in place, however modest and however blocked by the political opposition. His plan calls for broadening the tax base by eliminating many loopholes, while cutting the marginal rates for those in the lowest and highest income brackets. He also would cut back programs that kill incentives for the jobless to return to work, raise the cost of employing workers and keep average work weeks in Germany among the lowest in the industrialized world.
Mr. Schroeder, on the other hand, has no coherent program at all. He has chosen Jost Stollmann, a popular self-made millionaire, to be his economics minister if elected, and Mr. Stollmann has made speeches that employers and conservatives want to hear. But Mr. Schroeder himself, as governor of Lower Saxony, showed a strong penchant for big government, and for government involvement in business decisions. In his economic platform, insofar as he has one, Mr. Schroeder promises to repeal even the moderate welfare cutbacks and employment-law reforms that Mr. Kohl has managed to pass. He also calls for a big increase in energy taxes to help pay for all these benefits.
For Germany's army of 4.3 million unemployed, the solution lies in a radical rethinking of policies that chase jobs out of the country. The reforms must include changes in employment protection rules that favor current jobholders by discouraging the hiring of new workers. They also must include measures to remove disincentives for unemployed workers to seek jobs, and efforts to police the benefits system more closely. Critically, reforms also must include reductions in public spending to cut the country's excessive tax burdens, plus eliminating much of the overregulation that stymies business development.
As the election nears, these issues unfortunately have been swept out of view. Instead, the public discussion is focusing on the horse-race aspect of the campaign - the fact that Mr. Kohl is fast closing in on Mr. Schroeder, who until recently held a comfortable lead in the polls. The commentary, therefore, has centered on the nature of the coalition that may emerge from Germany's multiparty election, including the unusual prospect of a ''grand coalition'' of the two main political parties themselves.
All of that makes good theater. Yet once the dust settles, the same old problems will emerge: high taxes, overregulation and a labor market that doesn't function very well. There is still time for German voters to demand solid solutions from their leaders, and time for Mr. Kohl and Mr. Schroeder to deliver.