The elections to the German Bundestag produced a narrow result. After hours of suspense and uncertainty during the night of 22 September, the victory of the ruling coalition of Social Democrats and Greens was finally confirmed. However, the shares were unevenly distributed among the parties. While the SPD lost 2.4% of the votes, the Green party gained almost 2%, which came as a surprise given the recent polls. The CDU/CSU's increase of more than 3% turned out to be insufficient as the Liberals (FDP) did not live up to the pre-electoral expectations, reaping only a somewhat disappointing 7,4% of the votes. A crucial factor for the government's success was the fact that the post-communist PDS (which received only 4%) was not able to enter the Parliament, remaining well below the 5% threshold.
Gerhard Schröder has received a mandate for four more years, but it was not regarded as an overwhelming triumph; it remains to be seen if the next term will see a more coherent approach in foreign and European policy by his government. So far, it seems that domestic policy concerns have been very much at the core of foreign policy choices.

Priorities of the New Government: Danger for the Stability and Growth Pact?
The main issue of the election campaign was economic and employment policy, an area in which the coalition's performance had not been particularly strong; now it seems that Gerhard Schröder wishes to make it a priority of his new government. The creation of a new Ministry of Economy and Labour, labelled 'Super Ministry', and the takeover of this department by Wolfgang Clement, formerly Minister President of North Rhine Westphalia, the largest German state and social democratic stronghold, is regarded as a clear expression of this intention. A number of proposals for reforming the labour market which had already been submitted before the elections will now be taken as a blueprint for political action. The basic idea consists of injecting new dynamics and flexibility into rigid structures that have so far impeded the creation of new jobs. In short, Germany wants to be back at the top of the European league in terms of economic growth and employment.
A second issue of importance relates to fiscal policy, where the situation has become highly difficult. The budgetary deficit has come close to the 3% criterion established by the Stability and Growth Pact, making further adjustments and cuts in public spending unavoidable. A number of proposals have been introduced into the debate, including an increase in certain taxes and the elimination of fiscal privileges and state subventions. The newly-reinforced Green party has pleaded for an extension of the so-called 'eco tax' charging the consumption of fuel, which was widely discussed by the broader public. Such measures do not seem to be popular at the moment, leading the Chancellor to express his rejection of speculations about new taxes. On the other hand, Hans Eichel, who is sure to be confirmed as Minister of Finance, has held a tight grip on the budget in the past, and will no doubt attempt to continue his policy of consolidation. However, there seems to be agreement among SPD and Greens in adopting a more flexible approach in the future, reducing the speed of the consolidation process, while still remaining committed to the achievement of a balanced budget until 2006. It has even been indicated that Germany could tolerate a deficit over and above 3% if other countries were also willing to do so. As far as the actual figures are concerned, some observers estimate that the threshold has already been overstepped. This may have considerable impact on the Stability and Growth Pact and could trigger off negative reactions by the financial markets and also weaken the euro.

Foreign and European Policy: Continuity Prevails, but a Fresh Start is Needed
Concerning the impact of the elections on foreign and European policy, caution should prevail. However, some first conclusions can be drawn. The basic message of 22 September seems to be that of continuity. There is no major change to be expected in Germany's basic EU positions. Joschka Fischer will most surely keep the Foreign Office, remaining in charge of European Union affairs. Edmund Stoiber's idea of concentrating EU matters either in a single Ministry or under the auspices of the Chancellor's office will not come true; it is even to be doubted if Stoiber himself - in case of victory - would have been able to manage it. It is reported that Gerhard Schröder has tried to transfer competencies in EU policy-making out of the Foreign Ministry and into the Chancellor's Office, but this did not happen due to the strengthened position of the Greens after the elections.
The foreign policy situation is not easy for Germany. Its negative stance on the issue of military intervention in Iraq has caused serious trouble with Washington, leading to a considerable deterioration of German-US relations over the last months. One of the new government's first tasks will therefore be to restore the transatlantic partnership with the Bush administration. On the EU front, the most important issue of concern has been the lack of partners for the German position on Iraq; most visibly, there have been a series of disagreements between Paris and Berlin, making it improbable that both countries could join again in becoming the engine of European integration, in particular in the field of foreign and security policy. Disenchantment seems to be the prevailing sentiment at the moment.
Schröder's first visit abroad after the elections took him to London, where he met with British Prime Minister Tony Blair; observers noticed with surprise that the Chancellor had not chosen Paris; this seemed to be a hint that relations with Chirac were not at their best - not least due to the closeness which the French president had shown to Edmund Stoiber during the election campaign. A second reason was assumed to be behind the trip to London: the German chancellor was trying to improve relations with Washington and had asked for British support and mediation. This again stressed Blair's self-chosen role as a bridge between the US and the European partners, trying to keep both sides in a dialogue.
Relations with Washington are showing only slight signs of relaxation. President Bush did not congratulate Schröder for his re-election, which was considered as a rather unusual act. The first polite message received from the White House was addressed to President Rau on 3 October, the anniversary of Germany's unification, when Bush underlined the close links and partnership between both peoples. The first challenge to German-US relations therefore lies in improving the political atmosphere between the governments. This is still a long way ahead, but good-will signs are currently being sent out from Berlin.
However, the more fundamental and enduring problem is to be found in the persistent German position towards US policy in Iraq. Here, Schröder has underlined his rejection of military strikes. Those who expected a sudden turn around from the Chancellor after the 22 September elections have been proved wrong. He cannot afford to radically change his view, as this would be interpreted as a political manoeuvre after the elections; alternatively, his initial posture would be seen as a tactical move aimed at winning votes, but lacking in fundamental principles and even moral quality.
At the European level, the problem remains that there is no coherent position among the leading powers. France defends a different approach based upon a United Nations mandate, while Britain remains most loyal to the US. So far, no essential progress has been achieved in developing a common EU position.

The EU Agenda ahead: Issues and Interests
In years to come it is probably safe to assume that there will be considerable continuity in Germany's EU policy. Germany is still strongly committed to European integration, but it will try to push for substantial reforms in key policy fields. After the elections, the government will focus again on the EU agenda where fundamental decisions have to be taken. Germany favours enlargement and expects that 10 countries will become members by 2004 as currently foreseen by the Commission. Chancellor Schröder has already voiced his determined support for this decision, which he has described as fair and reasonable.
However, the fight for the financial burden-sharing in the EU will continue, bringing the net payers like Germany, Netherlands and Sweden into conflict with the net recipients, particularly from the South. The strained budgetary situation in the federal republic most surely will contribute to a rather determined position by the new government. Nevertheless, in the end Germany will not insist at all cost on rigid claims as the country's interest in enlargement by far outweighs the possible price of the new accessions.
In the field of agriculture, the new government will demand further steps going beyond the Commission proposals of July 2002. Together with the Dutch Prime Minister, Balkenende, shortly after the elections the German chancellor demanded cuts in farm subsidies in favour of the new members and at the expense of the recipient countries, which was harshly rejected by the latter. At a meeting between Schröder and French President Chirac in mid-October 2002, no agreement was reached on this controversial issue, but both sides wish to continue their search for a compromise with a view to the next European Council meeting. In the area of structural policy, Germany is also in favour of more freedom for action by the member states. The social democrats have already expressed their preference for co-financing models, and this may well lead to conflict with France and the Southern countries.
As far as the overall reform of the EU is concerned, the federal republic may try to strike a balance between an Europeanist approach and a strengthening of some intergovernmental elements. Here, there is no natural partner currently available. Whether or not there will be a Franco-German axis in future remains very much in doubt at the moment. Furthermore, Britain is unlikely to be a constant ally on a broad range of policy fields.
Be this as it may, in the debate about the future of the European Union, the official German position has not been overwhelmingly clear so far, and ambiguity has largely prevailed. In a meeting with President Prodi in early October, Schröder expressed his intention to strengthen the European Commission, but at the same time he also seems to back the Franco-British-Spanish proposal for creating an EU President to be appointed by the heads of state or government. Within the Commission this ambivalence has caused some irritation, coming as it did at a time when this institution is suffering from political weakness and badly needs clear signs of support. Making both these positions - Europeanist and intergovernmentalist - compatible appears to be a difficult task.
In Common Foreign and Security Policy Germany will push for a strengthened European role. The establishment of a Security and Defence Policy will be one of the new government's basic goals, although the country still suffers from an obvious deficit in capabilities and resources. It is therefore not to be expected that Germany will substantially increase its defence budget in order to bring it closer to the British or French share of GDP. The coalition negotiations at least led to a commitment in revisiting the maintenance of a conscription army; defence minister Peter Struck seems to be more flexible on this idea than was his predecessor, while the Green party anyway favours professional armed forces.
As is true of other EU member states, Germany has been rather hesitant to prepare a European takeover of Amber Fox operation in Macedonia without a clear settlement of the EU-NATO agreement. On the other hand, US pressure seems to be pushing the EU to take some action. Germany's capacities in this field could be quickly exhausted as the armed forces are already operating up to their limits.

Germany: The Uneasy Partner?
Major decisions are to be expected in the EU in the coming months and years. At the end of 2002, enlargement will require the go-ahead from member states; conditions for shaping key matters like agriculture and structural policy will have to be discussed in the wake of the new accessions; most importantly, Europe's future will be determined at the Convention which is currently meeting and at the subsequent IGC. Germany may well clash with other EU members over certain issues, and it may even come to be perceived as an uneasy partner. On the whole, it will probably defend its interests with determination, but not without readiness to compromise. The more fundamental challenge is that the Federal Republic must develop a long-term strategy for the EU and search for partners with whom to pursue it successfully. At the moment, this is the most pressing task beyond day-to-day decision-making.

Dr. Udo Diedrichs

University of Cologne