German crisis (part 2)

(part 1 here) Oskar Lafontaine is set to leave Schröder's Social Democratic party (SPD). He hopes to create a new leftwing grouping to run against it.

The Alternative Labour and Social Justice (WASG), a splinter group of former SPD supporters, scored 2.2 per cent of the votes at an election in North Rhine-Westphalia last Sunday despite a low-key campaign. The neo-communist PDS, meanwhile, is credited with 4-5.4 per cent of the votes nationally.

"It makes no sense for two small parties like the WASG and the PDS to run separately against the SPD," Mr Lafontaine said. "If it comes to a joint list, I am ready to join it." (Financial Times, 24 May 2005, 20:49)

Interesting discussion here. Schröder said a couple of years ago in an interview with the FT that he and Blair were trying to get to the same place, but coming at it from different directions, with Britain needing to rebuild public services, after the years of Conservative rule. Kohl, on the other hand was no Thatcher.

Update: I don't think it's true that 'the ECB seem to want inflation to fall as far as it can possibly go'. The problem, as an orthodox economist would see it, is that it is not possible to increase growth in Germany and France by monetary policy without creating higher inflation, because of the 'structural problems' and 'inflexibility' that their model of 'social protection' entails. Translated, that means that benefits for the unemployed are too generous and tax rates are too high.

Schröder is now committing suicide and leaving the conservative CDU and Angela Merkel to sort out the 'reforms'.