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The New German Choices

On 24th October Angela Merkel and her new Liberal allies published the Coalition Treaty which sets out the principle choices of German policy for the next four years.

The government contract that covers 124 pages and 6,136 lines for the 17th German government makes a deliberate choice in economic recovery via growth.

Germany's undeniable commitment to an active policy in the fight against global warming, which emerges again this time round does not however go as far as approving irresponsible calls for a new development model based on reduced growth. In addition to this even the abandonment of nuclear power is being questioned.

New Germany accepts its deficit and the growth of its debt. It has chosen a policy to foster economic activity which implies a reduction in taxation, an increase in social insurance contributions in order to face the escalating social debt that is notably due to the cost of the ageing population.

The government promises to support business which is part of a European trend that has already been witnessed in France, Sweden and Italy ; the new Finance Minister, Mr Wolfgang Schäuble, custodian of the CDU's creed also has to manage the social aspect of this new policy.

As the crisis continues new political divergence is emerging in Europe. On the one hand there are the supporters of the social but realistic market economy and on the other, as in Spain, where old responses such as taxation and increased restrictions on the economy continue to be applied.

To rise to the challenges launched by the emerging economies, the former have opted for work and even disfavour, at the expense of temporary debt, the latter have preferred the facility of usual revenues and in all probability the risk of decline.

The verdict will be given when the crisis is over but the first dominant trend obliges the European Union to adopt a new course.

It cannot rely on the old rules.

Twenty of the 27 Member States are already subject to an excessive deficit procedure on the part of the European Commission. What will happen when they are all in the same situation?

And what about the Euro?

In the face of the sliding dollar and Chinese cynicism about the value of its own currency Europe is in the midst of a struggle for the redistribution of world power.

Will we allow the European currency to continue to rise against our interests or will we tell our partners, with threats in our support, that we will not pay for their imbalance to the point of total ruin?

The German Coalition Treaty recalls quite clearly that the relationship with France is exceptional and it alone can take the Union forwards. It is vital for us to launch this project together. Other plans include common security and defence for example; these should help to jump start a powerful Europe, which although now weakened by the crisis and for whom inertia would prove fatal, still demonstrates real advantages.

Shirt sleeves now have to be rolled up and work started.