The gathering storm

Historic change is looming in the heart of Europe. At stake is far more than a mere change of leader

Schroder's 1968ers reach the end of the line. By Daniel Johnson

As the campaign nears its climax, voters hesitate. They are edgy about "Angelanomics", the prescription of flat tax and pension privatisation that Angela Merkel says is necessary to treat their ills, and they have a lingering fondness for Gerhard Schroder, despite his broken promise to cut the worst unemployment since the Weimar Republic.

In their hearts and stomachs, however, they want change. They are fed up with being the sick man of Europe and they sense that regaining their dynamism of old means electing Merkel rather than Schroder. The Japanese, who have a similar role in Asia, endorsed Junichiro Koizumi's reform agenda decisively on 11 September. Barring an upset, Germans will follow suit.

If they do, their choice will have an importance far beyond the normal alternation of democratic politics, because this election is a watershed for Germany and for Europe. By voting for Merkel or her allies, Germans will be choosing to sweep an entire political generation off the stage - the former radicals of 1968, those rebellious children of the Nazis who, in their middle age, came to shape their country's self-image and its outlook.

This generation spent three decades criticising the old men who ran the country, until the very last of these, Helmut Kohl, belatedly vacated the stage in 1998. But their reign since then, with Schroder at their head, has been most unhappy; their long march through the institutions has ended in disillusionment. Tired, fragmented and short of ideas, they seem poised to take their last bow on Sunday, and their departure promises to unlock dramatic possibilities, delivering a different sort of Germany.

The 1968 generation was born angry and rejected everything about the country in which it grew up. The postwar period of the economic miracle valued hard work and efficiency, discipline and uncomplaining resilience. Former Nazis and ethnic Germans from the east were reintegrated into West Germany, the slate was wiped clean, and when the cold war forced Germans to take sides, they chose capitalism.

It was an unashamedly materialistic society. When I visited West Germany as a sixth-former in 1974, the big event of the time for the family with which I stayed was not the sensational resignation of the chancellor, Willy Brandt, over a spy scandal, but a trip to the Mercedes-Benz factory in Stuttgart to buy a new car.

The students of the 1960s identified all this with the Nazis, and by the 1980s, under their growing influence, the "don't mention the war" syndrome of Konrad Adenauer's Germany was reversed, so that the process of "overcoming the past" became a national obsession. The symbol of German rehabilitation was no longer the Mercedes, but the memorial.

If they were right to reject the suffocating silence about the Nazi past, their response did not make Germany more whole, or a healthier place. From having been the hardest-working nation in Europe, it became one of the laziest. In the land of Luther, Kant and Bach, the churches stand empty, the universities are mediocre, and there are few writers, artists or composers of international repute. At the same time the postwar identification with the American victors - Kohl's idea of fun was and is listening to the United States Air Force Band - has turned into a visceral anti-Americanism that Schroder is happy to exploit and legitimise.

As for the radicals themselves, as they reached middle age they proved far more sybaritic and self-indulgent than their elders. Many drifted through life, fuelled by drugs or drink and living off wealth accumulated by their parents. Now that the birth rate has fallen, they will have to be supported in old age on state pensions funded by a dwindling number of younger taxpayers (one reason why Merkel is thinking of privatising the pension system).

Above all, the 1968ers have aborted the older generation's attempt to rebuild national pride on the foundations of economic success. The last straw was the abolition of the greatest achievement of the economic miracle: the Deutschmark. The result is a void: present-day Germans do not suffer from excessive self-esteem, but its opposite. Younger Germans - not to mention the survivors of the wartime generation - instinctively know this, and in Angela Merkel they have found an improbable heroine.

Merkel is the antithesis of the 1968 generation of Schroder and Joschka Fischer, the Green leader and foreign minister, and not just because she was only 13 in the spring of 1968. For one thing, she is an east German. For her and her friends, 1968 had nothing to do with Paris and everything to do with Prague, the Soviet invasion of Czechoslovakia, and the crushing of the last hope that communism might be reformed.

In German terms she is a nonconformist. Unlike her mainly Catholic predecessors in the Christian Democrats, she is the child of a Lutheran pastor. She studied natural rather than social sciences and gravitated to the right rather than the left, America rather than France. Only in her private life is she typical of her contemporaries: divorced and childless, she is a feminist in the unostentatiously German manner.

Her rivals, mostly men, resent her and can be expected to knife her at the first sign of trouble; her response has been to make her closest advisers female. Even her admirers would not call her glamorous; nor is she maternal. Yet her very dowdiness has worked to her advantage: she has been underestimated by rivals and opponents, and as she approaches the threshold of power her deliberate indifference to the vanity of celebrity makes her seem all the more formidable. It is Schroder, not Merkel, who sues newspapers for claiming that he dyes his hair.

Her genius is to have realised that Germany is suffering from a bad case of wounded pride. The euphoria of reunification has long since been dissipated and any lingering hopes vested in the Red/Green coalition have been dashed in the three years since Schroder was re-elected by the skin of his teeth. This is a nation still nursing a hangover from the 20th century, confused by its plummeting prestige and impatient to move on. Merkel is the brisk, no-nonsense scientist who can show her people the way.

It is particularly the "unpolitical German" (a phrase of Thomas Mann's) who is readiest to give her a chance. Despite their innate caution and angst about radical measures such as a flat tax or privatisation of pensions, such people see that Merkel at least has a clear idea of the gravity of the problems that agitate them.

Her inspiration is not so much Margaret Thatcher - she shudders at the comparison - as Ludwig Erhard, the thoroughly patriarchal, cigar-chomping sugar daddy of the postwar economic miracle, who defied the gloom-mongers of the 1940s with his bonfire of controls. The choice now before Germany seems reminiscent of that era: between the Social Democrats' dreary prospect of austerity for most and the Christian Democrats' alluring promise of prosperity for all. For most Germans, that is no choice at all.

As for unemployment, which was always the big test in a country where folk memories of the Depression and its consequences are still vivid, Merkel is gambling that Germans are ready to swallow a dose of Thatcherite medicine. They want an end with horror rather than a horror without end.

As the two front-runners' crucial television duel on 12 September demonstrated, the Social Democrats and their Green partners have no big ideas left and so have been reduced to defending the indefensible. "You cannot seriously believe that five million unemployed is satisfactory," Merkel said to Schroder, and he had no adequate reply. Schroder is fighting a negative campaign against Merkel, whom he depicts as a mere "neoliberal" stooge of the Americans. But it is obvious even to his own supporters that he has run out of steam. Fischer, the only star in his team, is visibly itching to leave office.

There is more to this election than Merkel v Schroder, however. Germans can opt for a combination of nationalism and socialism, as they have done in the past after military defeats or economic depression. This is what Oskar Lafontaine's new Left Party is offering: a "popular front" combining disgruntled Social Democrats in western Germany and former communists in the east.

His alternative narrative tells of how a wealthy, cosmopolitan elite is destroying the "community" (Gemeinschaft) of the German Volk. He denounces "foreign workers", who are allegedly taking jobs from Germans, and he demands that only those who speak German and pay their taxes should be allowed to live in Germany. He even rants about the extinction of the "white peoples" of Europe. Little wonder that polls show the far-right vote, which had been rising in the east, shifting to the Left Party.

Lafontaine will fail, but the re-emergence of his brand of demagoguery tells us that something is stirring deep in die Heimat. Germany is paying the price for Schroder's shameless anti-Americanism, which has reactivated the anti-western forces that wrecked the Weimar Republic, wreaked havoc under the Third Reich, and paralysed the former East Germany.

Where Schroder has flirted with Moscow and Beijing, Merkel would look firmly towards Washington and London. She knows that Germany has always fared best when aligned with the west, and especially with the Anglosphere; yet she has cultivated not only Bush and Blair but also the New Europe, particularly Poland and the Baltic states. Even since 1945, Germans have not always treated their smaller neighbours to the east with respect, and it is part of Merkel's appeal that she acknowledges this.

The odds are against any leader turning Germany around quickly. As Tony Blair put it with British understatement, after seven years "Gerhard has proven his courage by starting important reforms", implying that somebody else will have to complete them. If Merkel can survive the envy of her own colleagues, overcome the extreme conservatism of the political system and enthuse a more than usually cynical electorate, she might just succeed where Schroder has manifestly failed.

Lost in the squabbling: the "French model". By David Lawday

Much may be made by cartoonists of Jacques Chirac's blurred vision, but a minor stroke suffered by the 72-year-old president has sharpened the political focus: the Chirac age - an age rooted in the paternalist legacy of Charles de Gaulle - is over, and a shift in France's political identity is at hand. The difficulty lies in disengaging from the "French model", put in place from the 1960s, without losing its social blessings.

The Chirac age stretches back much further than the ten years of his presidency: he has been at or near the pinnacle of power since first becoming prime minister in 1974, and has learned in those years that the way to stay at the top is to alter as little as possible a system built on economic regulation and generous welfare.

That was all right as long as the French model was working, which it did pretty satisfactorily for a long time. But if Chirac has not dared change anything, globalisation, high unemployment, a stagnating economy, the lure of Anglo-Saxon economic liberalism and a political phenomenon named Nicolas Sarkozy have changed things for him. There is little surface evidence that France has fallen from economic grace, but the figures are depressing. It is ordinary people on average wages, and the young in particular, who are most unnerved. These are the voters who killed the European constitution, not out of marked disaffection with Europe, but out of fear of losing their jobs and frustration at their government's failure to reduce unemployment.

For many "little people" life feels precarious. Immigration does not help, though immigrants are plainly needed. Besides shock and pity, the commonest reaction to this year's fires that destroyed three central Paris hotels and hostels used by African immigrants seemed to be resentment that they were there at all. Dozens died.

The way out for increasing numbers, it seems, is to get out. Estimates that 400,000 French citizens have elected to improve things for themselves in Britain may prove exaggerated, but the prospect of paying roughly half the tax demanded of them in France is tempting. As they now say, the British go to France to relax, and the French go to Britain to work. It is a matter of particular chagrin that the standard around which debate on policy in Europe now turns is Blairism, which Chirac protests he abhors.

Chirac's stroke, while apparently not disabling, abruptly alters the landscape: his supporters can no longer promote the myth that he will stand again for president in just over 18 months' time to defend the French model. It was, besides, a myth maintained to save him from becoming a lamer duck than he already is.

It won't be events in Germany that decide which way France turns; it will be how the home political debate evolves on economic liberalism - or, to twist the knife, on Blairism. Angela Merkel gets no ecstatic reviews in Paris. To begin with, France's rejection of the EU constitution puts the incoming German chancellor in the front saddle of the Franco-German tandem that customarily leads Europe, and it is hard for the French to envisage Merkel at the handlebars. The trouble is that those who are up for the task of remodelling the French system are engaged in a furious round of ego-politics that takes precedence over reform.

Whatever the next president of France lacks, it will not be self-esteem. The man who prizes himself most is Sarkozy, the interior minister and unofficial co-head of government, but Chirac's stroke has encouraged a whole host of factional chiefs on both right and left to jump forward. Forget party unity, for- get party discipline. This is each for himself.

Across Chirac's sickbed, as it were, "Sarko" and his supposed partner at the head of government, Prime Minister Dominique de Villepin, have been flailing at each other as if the presidential election set for 2007 were due next week. The president hadn't spent his first day in hospital before Sarkozy was demanding a "rupture" with the economic policies pursued by the government he co-directs. Twice he proposed a shift to Blairite liberalism to the UMP, the conservative majority party in parliament which he also leads. Sarkozy's blows seem aimed less at Chirac than at Villepin, who continues to insist on preserving the French model as the basis for any economic initiative.

Villepin it was who amused globalisers by demanding "economic patriotism" from French business. His pledge to improve the turgid economy during his first hundred days as premier - which ended on 8 September - turned out to be as inconclusive as it was rash, though unemployment has edged down a shade and his popularity has risen. Predictably, the results are rubbished by the Sarkozy camp as designed only to underpin Villepin's personal standing. If anyone throws himself around with quite the vigour of Sarkozy, it is the prime minister.

That neither Villepin nor Sarkozy, still king of the opinion polls, had an inkling of Chirac's hospitalisation until the day after it occurred has only made them crosser with each other. It did not look good, but at least the prime minister had the satisfaction of replacing Chirac at the summit-level UN General Assembly in New York, where he was aiming to face off with the bully he had latterly confronted over the Iraq war, President Bush.

Things are little better on the left. It is Socialist Party tradition, particularly in opposition, to split into "currents", each led by a chief with an eye on the presidency. Some room might have remained for harmony if they hadn't skewered themselves in the EU referendum. Having opted formally for Yes, the party made a spectacle of itself by providing the winning votes for No.

The Socialist ego-trippers begin with Laurent Fabius, architect of his party's collapse on Europe. Fabius, a former prime minister no less patrician than Villepin, pins his personal hopes on taking the party hard left, untainted by the "coldness" of Blairism. This allows him, incongruously, to paint his rivals as rightists or cheerleaders for job-stealing globalisation. Lined up against him are Francois Hollande, the party's uninspiring presi- dent, Dominique Strauss-Kahn, its economic brain, Jack Lang, the faded culture icon, and Martine Aubry, mother of the left's crowning achievement in recent years, the 35-hour week. They are heading for a showdown at a party congress in November.

Fabius has painted himself into an awkward corner from which he seems unlikely to escape. Sarko, who has Tony Blair's persuasive way with words, knows where he wants to go but carries a potential for self-destruction. Villepin, like the remaining Socialist contenders, avoids straight commitment on changing the French model. It is a safe bet, though, that all three men will now gravitate, however quietly or broodingly, towards a break with French tradition. Farewell the 35-hour week.