LONDON OFFICE The Chandlery, Office 609 50 Westminster Bridge Road London SE1 7QY Tel:+44-(0)20-7721 8745 Fax:+44-(0)20-7721 8746 e-mail: feslondon@dial.pipex.com website: www.fes.de/london FOCUS GERMANY The new German Government and its Central Political Challenges Marc Brost More than 15 years after reunification, Germany is again a divided country. I am not referring to the differences between east and west, not the“wall” in people's heads which is still there after all that time. What I refer to is the economic situation in Germany: the question as to how well or badly off Germans are. We have all read the headlines about"Germany’s surprising economy", we have all read- es­pecially in the foreign media- that Germany's chances of an economic revival are now greater than they have been for some time. Conversely, we are all aware of the opinion of most Ger­man commentators: reforms so far have not been far-reaching enough; the Germans must learn to tighten their belts; or, as the German Federal President Horst Köhler put it in his TV appearance when the German parliament was dissolved:"The nation's finances are in a dire state hitherto unknown. Our future and that of our children is at stake." Voters had the choice of two models As befits a country so divided, Germans were faced during the recent election with two utterly different concepts. On the one hand, there was the Nordic model, along the lines of Denmark, Sweden or Finland. The Nordic model means a high level of state spending and strong trade unions, comparatively high wages and relatively low employment severance protection but with strong support for the unemployed in the first few months. That was more or less the SPD's election manifesto. The CDU/CSU alliance was presenting the Anglo-Saxon model- and not just because Angela Merkel was constantly compared to Maggie Thatcher. The Anglo-Saxon model means weaker trade unions and a largely unregulated labour market, companies empowered to act- and ul­timately the implicit promise of far greater economic growth than in the rest of the continent of Europe. Marc Brost is the Deputy Economic Editor of“Die Zeit” in Hamburg