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An aloof 'Miss World'
By Bertrand Benoit

Published: November 3 2007 02:00 | Last updated: November 3 2007 02:00

Three days ago in Mumbai, Angela Merkel, clad in her trademark orange blazer, sat down with a group of women from a nearby village for a chat about microcredits and how these had changed their lives. Were the village's men involved in deciding how to invest the small loans, she asked. Of course not, came the answer. "Anyway," a woman added, "when the men gather, it always ends in disputes."

Germany's chancellor knows this all too well. Back in Berlin, and with barely enough time to recover from the jetlag, she will chair a meeting of her coalition's leading representatives tomorrow - a circle composed exclusively of men, most of them yearning for a fight.

Feted as "Miss World" by the popular Bild tabloid five months ago for her handling of Germany's twin Group of Eight and European Union presidency, Ms Merkel, who celebrates her second year as chancellor next month, has returned to the less flattering task of steering her unruly coalition at home.

The alliance of rival Christian and Social Democrats is coming under strain. The SPD, the junior partner, has launched frontal attacks on Ms Merkel and her CDU, and sought to prop up its failing popularity ratings with a marked leftwards shift in its discourse. Economists, meanwhile, are moaning about the ruling parties' leftwards drift, the government's inaction in the economic policy field and attempts to roll back the courageous yet unpopular economic reforms launched by Gerhard Schröder, Ms Merkel's predecessor. The chancellor herself is getting in the line of fire. Analysts are growing impatient and puzzled at the silence from the chancellery. As senior and junior members of the coalition squabble over the future course of economic policy, Ms Merkel appears to be floating above the tussle, aloof and disengaged.

A motion adopted at the SPD party conference last weekend that torpedoed the government's planned privatisation of the Deutsche Bahn railway operator has yet to draw a single word from the chancellor. While touring India, she refused to comment on SPD demands for longer unemployment benefits, legal curbs on temping agencies, exemptions from the higher retirement age and the re-introduction of a tax subsidy for commuters scrapped in January - some of which are up for discussion at tomorrow's meeting. Yet she found time to praise the international football federation's choice of Germany as host of the next women's world cup.

"The SPD is running amok, the house is burning and the chancellor flies to India," says Dirk Niebel, secretary-general of the opposition Free Democratic Party. "Either she wanted to be chancellor and is now resting on her laurels, or she has already set her sights on the next election. I hope the latter is true, but there is a big danger that damaging policy decisions will be made in the meantime."

Even her foreign policy, long immune to attacks, is drawing abuse. Her decision to invite the Dalai Lama to the chancellery last month, which led the Chinese government to cancel a string of bilateral events, was "tactless", according to Jürgen Hambrecht, chairman of the chemicals group BASF. Frank-Walter Steinmeier, her SPD foreign minister known for his diplomatic self-restraint, exploded last weekend, labelling Ms Merkel's demonstrative focus on human rights as "show-window foreign policy". Critics see it as provocative and harmful to Germany's economic interests.

Economic liberals are also uncomfortable about the chancellor's silence. A free-marketer who ran for election in 2005 on a platform of tough economic reforms, she seems to be quietly acquiescing as her own CDU drifts to the left, aping the SPD's new-found enthusiasm for "social justice".

Yet Ms Merkel is obviously doing something right, at least in the eyes of ordinary Germans. Two years into office, she has yet to drop from the top position in the ranking of Germany's best-liked politicians. Such popularity - unheard of for a postwar chancellor two years in the job - has something to do with Germany's healthy economy, say pollsters, which, after touching bottom in 2005 with more than 5m jobseekers, has now more people in work than at any time since the end of the war. Ms Merkel's insistence on human rights is also popular - more than 80 per cent of Germans supported the decision to entertain the Tibetan spiritual leader at the chancellery rather than in private, as Mr Steinmeier had suggested.

So are her down-to-earth ways. When not touring the world or ruling the country, the chancellor may be spotted in the aisles of the Edeka supermarket in the Friedrichstrasse railway station, half way between her office and her flat. Junior chancellery officials are full of praise for how she deals with the staff. "If you've worked hard and went the extra mile, even as an underling, she may ask you to drop by for a cup of coffee," says one person familiar with the inner workings of the chancellery.

Yet analysts say there is more to Ms Merkel's popularity. Her reluctance to intervene in the day-to-day political fights, they say, is less indecisiveness than political tactic. "She is a good student of Helmut Kohl [Germany's longest-serving chancellor and her mentor], who was adept at sitting out controversies," says Peter Loesche, a veteran political commentator. "As party chairman and chancellor, especially of a grand coalition, you are extremely exposed. You should always wait for debates to crystallise, for the strongest camp to emerge, before speaking your mind."

But is Ms Merkel's sphinx-like leadership good for Germany? Advisers admit that she saw her near-defeat at the last election as an indictment of her blood-and-tears campaign. "The lesson is you cannot win an election with a hardcore reform programme," says one. One chancellery official says she should be judged not by her words - or lack thereof - but by her actions. She may have to compromise with the SPD and left-leaners in her party on symbols, but he insists that she will not endorse any measure that would blow a hole in the budget or hinder employment. Given the exotic policy ideas circulating in the ruling parties, economists such as Holger Schmieding of Bank of America say they would be happy with two years of political standstill.

As Prof Loesche, puts it, Ms Merkel has lost neither soul nor conviction, "but the sad truth is, the only way to do politics as head of a grand coalition is by muddling through".
Copyright The Financial Times Limited 2007