Germany's left-right coalition cracks down middle

The marriage between Germany's left and right is showing troubling cracks less than a year after the champagne launch of the most ambitious experiment in current European politics.

Disliked by many among the rank and file, contested by party barons, the grand coalition of the Social Democratic Party with the Christian Democratic Union and its conservative Bavarian cousin the Christian Social Union may have a hard time notching up a second anniversary.

The unnatural alliance took life after elections in September last year produced a hung parliament. It took two months of negotiations to yield the deal, sealed by a complex and solemn roster of pledges, with the CDU's Angela Merkel as Chancellor - the first woman and the first East German to head a German Government.

The only other time a grand coalition had been forged in Europe's biggest economy and most populous country was in the 1960s.

France, Italy and other European nations are closely following the new experiment, for they face many of Germany's chronic problems and are themselves mulling whether a national coalition is the right tactic to face the challenge.

Merkel notched up some early successes. She did well in foreign policy, restoring the lustre of friendliness with the United States after Germany's refusal to join the Iraq war, and gained points for reforming the federal political system, cutting subsidies and raising the retirement age to 67 to help meet a looming pensions crisis.

Growth this year is put at around 2.5 per cent of gross domestic product, unemployment has fallen by 400,000 to around 4.4 million and the deficit is at last being reined in below 3 per cent of GDP to meet euro-zone rules.

But this has been the easy part. The SPD and the CSU have wrangled bitterly over ways of reforming the €8 billion ($16 billion) annual deficit in Germany's health service, the most expensive medical system in Europe. The result has been a catastrophic fudge that leaves no one happy and could make the financial hole deeper.

The squabble exposed deep divisions within the conservative ranks, especially among powerful CDU and CSU figures who head regional states.

Under Germany's federal systems, the lander (states) are represented in the upper house and have the power to veto many laws. The conservatives control 11 out of the 16 states. Three conservative state leaders face crucial elections in 2008 and do not want to be associated with unpopular reforms.

Pressure from Bavarian Premier Edmund Stoiber, the conservatives' champion in last year's elections, forced Merkel to make big concessions in the health deal so that Bavaria and other rich states would not have to contribute so much.

SPD chief Peter Struck, who heads the party in the lower house, took Merkel to task for backtracking.

"Angela Merkel has been forced to learn in the past few weeks that she will have a hard time keeping the state premiers in line," Struck said.

Merkel delivered a stinging slap, saying she had had enough of Struck's "incessant attacks" on state premiers and said the coalition could only work in a climate of mutual respect.

More fudge and more squabbles can be expected in the coming year, from reforms in labour law to making up a budget shortfall to compensate for a cut in income tax and even to non-ideological issues, such as a smoking ban.

"There is a whole series of similar disputes lined up," the daily Frankfurter Allgemeine warned.

The first casualty of the sniping and the health-reform mess is Merkel's image as a woman in charge, capable of administering tough but effective medicine. But, if the current public mood persists, both conservative and social democrats stand to lose.

There has already been a fall in membership for the SPD and the CSU and a shock rise in support for fringe parties. Last month, an election in Mecklenburg-Vorpommern, a poor state in former East Germany, saw a breakthrough by the far-right National Democratic Party.

Wake up, grand coalition! headlined Bild, the country's biggest-selling daily, warning of a worrying weakening of public faith in Germany's mainstream parties.