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 Germany
Centrist Gerhard Schroder Elected Chancellor
In its most important election in decades, on
Sept. 27, 1998, Germans chose Social Democrat Gerhard Schröder as
chancellor over Christian Democrat incumbent Helmut Kohl, ending a
16-year-long rule that oversaw the reunification of Germany and symbolized
the end of the cold war in Europe. A centrist, Schröder campaigned for
“the new middle” and promised to rectify Germany's high unemployment rate
of 10.6%.
Tension between the old-style left-wing and the
more pro-business pragmatists within Schröder's government came to a head
with the abrupt resignation of finance minister Oskar Lafontaine in March
1999, who was also chairman of the ruling Social Democratic Party.
Lafontaine's plans to raise taxes—already nearly the highest in the
world—on industry and on German wages went against the more centrist
policies of Schröder. Hans Eichel was chosen to become the next finance
minister.
Germany joined the other NATO allies in the
military conflict in Kosovo in 1999. Before the Kosovo crisis, Germans had
not participated in an armed conflict since World War II. Germany agreed
to take 40,000 Kosovar refugees, the most of any NATO country.
In Dec. 1999, former chancellor Helmut Kohl and
other high officials in the Christian Democrat Party (CDU) admitted
accepting tens of millions of dollars in illegal donations during the
1980s and 1990s. The enormity of the scandal led to the virtual
dismemberment of the CDU in early 2000, a party that had long been a
stable conservative force in German politics.
In July 2000, Schröder managed to pass
significant tax reforms that would lower the top income-tax rate from 51%
to 42% by 2005. He also eliminated the capital-gains tax on companies
selling shares in other companies, a measure that was expected to spur
mergers. In May 2001, the German Parliament authorized the payment of $4.4
billion in compensation to 1.2 million surviving Nazi-era slave
laborers.
Schröder was narrowly reelected in Sept. 2002,
defeating conservative businessman Edmund Stoiber. Schröder's Social
Democrats and coalition partner, the Greens, won a razor-thin majority in
Parliament. Schröder's deft handling of Germany's catastrophic floods in
August and his tough stance against U.S. plans for a preemptive attack on
Iraq buoyed him in the weeks leading up to the election. Germany's
continued reluctance to support the U.S. call for military action against
Iraq severely strained its relations with Washington.
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