German Leadership in Trouble Over Economic Pact

FOR German Chancellor Helmut Kohl, it has been largely downhill since reunification.

This winter, he is in trouble again, getting very little cooperation for his "solidarity pact" - an enormous cost-cutting effort involving the federal government, the 16 state governments, unions, and industry.

The pact is to pay for economic recovery in east Germany, an undertaking made even more difficult by recession in the west.

During the reunification process, when the western economy was booming, Chancellor Kohl didn't have the fiscal worries he has today: a shortfall in tax revenues and an increase in unemployment benefits.

To compensate, the government will be borrowing again, ratcheting up the federal deficit by 10 billion deutsche marks ($6.37 billion) this year.

Last week, Kohl presented his pillar in the solidarity pact: tax increases and proposed savings in government spending. It fell flat.

The opposition Social Democrats branded it "sinister and antisocial," saying it cut too deeply into social benefits. Kohl will need the Social Democrats' support to get the financial package through the Bundesrat, the upper house of Parliament where the Social Democrats hold a majority.

Only industry appears ready to play the solidarity game, and on Monday pledged to increase investment in east Germany this year by 20 billion deutsche marks ($12.74 billion) - but only if trade unions hold back on wage demands.

The solidarity mega-deal was supposed to be completed by Christmas, and its delay is just another confirmation to the average German that the politicians in Bonn are incompetent. According to a poll published by the news weekly Der Spiegel Jan. 18, 51 percent of Germans have little trust in the country's established parties, and 38 percent have no trust whatsoever.

Germany's leaders are wondering whether this attitude will play itself out the same way it did in the American presidential elections, where the older generation was swept out in favor of the younger.

"We have too many old people occupying chairs here," says Fritz Fliszar, director of the Friedrich Naumann Foundation, which is affiliated with the Free Democrats, the junior partner in Kohl's coalition government.

Last October, Kohl celebrated his 10th anniversary as chancellor, but he shows no signs of being "office tired," as the Germans say. Helmut Hubel, a political analyst at the German Society for Foreign Affairs, says Kohl has suppressed young talent in the party and clearly intends to run for chancellor again in the 1994 national elections.

It could be that "Kohl won't get through this difficult period quickly enough" to win the next election, however, says Mr. Hubel. The chancellor "lost time" in making the tough choices for Germany, he says. "He declared the hour of truth two years too late."

Kohl's problems could be a benefit to the opposition Social Democrats (SPD) here, but that appears unlikely. The party's charismatic, young leader Bjorn Engholm is ruling over a divided kingdom. He is kept in check by powerful SPD "princes" heading up several German state governments and a rank and file attached to old party ideals which are no longer in touch with the general public.

Still, the kingmaker in German coalition building, the Free Democrat Party, obviously does not think the SPD's chances are too bad. Otto Lambsdorff, the Free Democrats' outgoing leader, said Tuesday his party would consider a coalition with the SPD and the Greens in 1994. Although Count Lambsdorff backpedaled on his statement yesterday, Kohl could not be faulted for being uncomfortable with his coalition partner talking so soon of switching sides.