Federal Republic of Germany

L

1

Economic Changes

While reunification (Die Wende, or “the change”) brought together long-separated families and friends, it also brought numerous economic and social problems to Germany, including housing shortages, strikes and demonstrations, unemployment, and increases in crime and right-wing violence against foreigners. Budget deficits caused by unification and worsened by a recession led to increased taxes, reduced government subsidies and increased privatization, and cuts in social services. While increasing the market for consumer products, reunification significantly affected the strength and competitiveness of the German economy. A gulf was evident between the two Germanys in standards of living, industrial performance, and infrastructure. Many East Germans felt patronized and overwhelmed by the west, and complained of second-class treatment. Many West Germans believed they were sacrificing their standard of living to support East Germans.

L

2

Attacks on Foreigners

Of great significance for Germany is the problem of xenophobia and attacks on foreigners. Since the end of World War II, West Germany addressed its often acute labour shortage by permitting immigrants known as “guest workers” to live and work there. Guest workers, many from Turkey, worked full-time and brought or raised families in West Germany, but were not allowed to become citizens. By the 1990s, Germany had nearly 2 million guest workers. In addition, 440,000 asylum seekers entered the country in 1992, an increase of 71 per cent from 1991. Of these, 122,666 were from the former Yugoslavia.

In 1992, about 2,300 attacks on foreigners were reported; in 1993, the figure was about 1,300. In that year eight died from right-wing extremist violence, down from 17 in 1992. Attacks on Jews declined, but attacks on homeless and disabled people more than doubled, from 145 to 324. Mass demonstrations protested against the violence, and the government increased its activities against neo-Nazi groups. In May 1993, the German parliament approved limitations on asylum for foreigners in Germany, which took effect from July 1, 1993. From June to July of that year, asylum applications to Germany decreased by 34 per cent.

In September 1993, Germany renewed its bid for a permanent seat on the Security Council of the United Nations (UN). As a council member, Germany would be expected to contribute troops to UN peacekeeping operations, a source of contention in the German parliament. Also in 1993, German voters ratified the country’s membership of the European Union (EU; formerly the European Community).

L

3

Painful Readjustment

The formerly impregnable German economy was rocked by worsening recession and attendant strikes in 1993, with growing criticisms of structural problems that included high labour costs, powerful unions, and overcommitment to quality of work at the expense of competitiveness. The so-called Solidarity Pact, designed to finance reconstruction of the east, was finally agreed in 1993, but further inflated a ballooning budget deficit, causing the Bundesbank to press for heavy government spending cuts.

In May 1994 Roman Herzog, a Christian Democrat, was elected President by parliament in place of Richard von Weizsäcker, who had reached his maximum two terms. The Federal Constitutional Court ruled in July that German armed forces could serve with the UN or other international missions outside the NATO area, subject to parliamentary approval, thus freeing Germany to send its forces outside Western Europe for the first time since 1945. In August 1994 the last Russian troops left Berlin, followed in September by the last British, French, and American troops.

In the October 1994 general elections, Helmut Kohl’s ruling coalition was returned to office for a fourth time, albeit with a majority reduced from 134 to 10 Bundestag seats. In January 1995 former officials in the East German government, including ex-premier Egon Krenz, were indicted for manslaughter over shootings along the Berlin Wall. In August the Federal Constitutional Court made a controversial ruling that hanging crucifixes in state schools was unconstitutional. As part of Germany’s new policy of undertaking external peacekeeping commitments, the Bundestag voted in December to send a 4,000-strong peacekeeping force to Bosnia and Herzegovina.

Despite recovery from recession, continuing economic problems were highlighted in January 1996 when unemployment reached a post-war high of 10.8 per cent; the government responded with new industrial initiatives, talks with trade unions, and some trimming of the social security system. After failing to reach agreement with unions and employers, the government introduced its own austerity and competitiveness package in April, including deep cuts in social security spending and deregulation measures.

In May, a regional referendum rejected a proposal to merge the city of Berlin with the surrounding state of Brandenburg, which would have re-created the territorial core of the old Prussian state. Also in May, the Constitutional Court cleared the implementation of a controversial law restricting numbers of asylum seekers, in an attempt to defuse continuing racial tensions.

L

4

Economic Restructuring

In a three-day protest in April 1997, thousands of German coal miners besieged Bonn over the government’s proposed acceleration of subsidy cuts to the coal industry. Following the protest, a compromise was reached with the acceleration of cuts to be slowed down. In 1997 it was admitted that Germany’s economic commitments would delay its joining a single European currency. Government attempts to adjust public finances ready for European Economic and Monetary Union (EMU) in 1999 by revaluing gold reserves were sharply criticized by many, including the Bundesbank, when the plan was announced in May 1997; by June the government had been forced to drop the plan. In July Chancellor Kohl’s tax-cutting reform legislation was defeated in the Bundesrat. The former head of state of East Germany Egon Krenz was jailed in August 1997 for his part in the deaths of East Germans shot while trying to cross the Berlin Wall, but was released pending an appeal.

By December 1997 the German unemployment rate was the highest since World War II, at 11.9 per cent. In February 1998 Germany announced that it had reached the economic criteria for participation in EMU. In March 1998 the charismatic reformist Gerhard Schröder was selected as Social Democratic Party leader, ready for the September general elections; in the same month, his party’s proposals to amend Germany’s citizenship law to allow naturalization of those resident in Germany were voted down. In April 1998 the ruling Christian Democrats suffered a disastrous defeat in provincial elections in Saxony-Anhalt, in a poll which saw far-right parties increasing their support. In April and May, Franco-German relations were severely strained by the French campaign to have a French official appointed head of the planned European central bank.

L

5

After Kohl

In the September 1998 general elections, Helmut Kohl lost power to Gerhard Schröder and the SPD, marking the end of 16 years of conservative government under Kohl. In October Schröder agreed a coalition with the Green Party and introduced a legislative programme including reform of German citizenship laws and measures against unemployment. In March 1999 Oskar Lafontaine, finance minister in the new government and SPD leader, stepped down suddenly over policy disagreements with Schröder; this was seen as strengthening the Chancellor and moving his government away from Lafontaine's traditional left-wing loyalties. In March, Germany joined the rest of NATO in military action against the Federal Republic of Yugoslavia over the Yugoslav government's actions in Kosovo.

In July 1999 Johannes Rau, a long-standing member of the SPD, succeeded Roman Herzog as Germany's president. In elections held in September a series of blows were delivered to his party and its leader, Schröder. The party lost support in five Länder elections and speculation began as to how long the Chancellor and his party would survive. In January 2000 former chancellor Helmut Kohl resigned as honorary chairman of the CDU, following a corruption scandal. The issue came to light when an arms broker claimed to have met a member of the Christian Democrats in 1991 and handed over a large sum of money for the Kohl government to approve an arms deal with Saudi Arabia. In December 1999, Kohl admitted to accepting approximately 2 million Deutschmarks worth of undeclared donations between 1993 and 1998, but in early 2001 prosecutors agreed to abandon their investigation of Kohl as there seemed no clear prospect of the case leading to a successful prosecution. Instead, Kohl was ordered to pay a fine of just over US$140,000. At the same time, the former head of state of East Germany, Egon Krenz, had his final appeal against manslaughter convictions turned down by the European Court of Human Rights. Two months later regional elections boosted Chancellor Schröder's Social Democrats, but weakened his coalition partners, the Green Party. In March 2002 Kohl won a further court battle, this time preventing access to Stasi (the former East German secret police) files held on him and other important people.

On January 1, 2002, Germany adopted Euro notes and coins along with 11 other European nations. Torrential rainstorms across central Europe in August meant that hundreds of thousands of citizens were forced to abandon their homes around the River Elbe and its tributaries and more than 20 were killed in the flooding. In the face of the catastrophe, and an impending general election, Schröder postponed the promised tax cuts to help pay for repairs. In the general election held on September 22, the Social Democratic Party lost some seats but held on to power, with 251 seats, as the result of a coalition with the Green Party, which won 55 seats.

Germany sided with France and Russia in requesting further time for weapons inspectors to complete their jobs in the growing crisis over Iraq at the start of 2003, with Schröder declaring that war against Iraq should only be regarded as a matter of last resort. In March the three countries said that they would not vote on a UN resolution to authorize war on Iraq. In March 2004, Schröder stepped down as leader of the SPD; he was replaced by Franz Muentefering. In the presidential election held in May 2004 the CDU candidate Horst Köhler was appointed. Köhler’s previous role was as managing director of the International Monetary Fund and before that he was president of the European Bank for Reconstruction and Development. Chancellor Schröder’s SPD party fared badly at the European parliamentary elections, losing 10 seats to trail the CDU by 17. Other parties to gain seats were the Greens (with 13), the Christian Socialists (9), and the Free Democrat Party and the Party of Democratic Socialism (7 each).

By February 2005, unemployment had reached almost 5 million and the SPD continued to lose popular support, trailing behind the opposition CDU in the regional election in Schleswig-Holstein and suffering further electoral defeat in North Rhine-Westphalia (a traditional SPD heartland). Schröder announced that he planned to seek the dissolution of the Bundestag and new federal elections, engineering a vote of no confidence in his own government in the Bundestag at the beginning of July 2005. The election, held on September 18, was closely fought, although the CDU headed by Angela Merkel was at one stage 20 points ahead of the SPD. In the event the CDU/CSU won a slim majority of just four seats over the SPD, and because of the small margin of victory Schröder refused to stand down. The CDU/CSU was unable to form a ruling majority with its preferred coalition partners, the Free Democrats, and deadlock ensued. Three weeks later a breakthrough emerged, with Merkel accepting the chancellorship of a “grand coalition”, in which marginally more ministries were to be given to the SPD. Franz Muentefering, leader of the SPD, resigned in October raising doubts about the stability of the newly formed coalition.