Schroder takes a sharp turn to the right

GERHARD SCHRoDER seized the reins of the Social Democrat party yesterday and executed a sharp right-turn. Upon the news of Oskar Lafontaine's departure, German business leapt for joy, with Frankfurt's main share index jumping 6 per cent yesterday.

But while Mr Schroder's allies were quick to pronounce a "new beginning" after the fiascos of recent months, the party's left wing sulked.

There was only one candidate, Mr Schroder himself, for the vacant post of chairman, yet six members of the party's presidium cast their votes against him, and three more abstained.

Mr Schroder won easily, as one might expect of the reigning Chancellor, but in a divisive manner, obtaining only 23 of the 32 votes available. "He does not represent the breadth of the party," explained Andrea Nahles, the head of the Social Democrats' youth wing.

Therein lies the difficulty Mr Schroder faces in his attempt to carve the party in his own image. The voting ratio of the presidium, a body he has been busily packing with his own people, is flattering in comparison with the balance of power at the grassroots level.

Mr Lafontaine had not become chairman by accident. He articulated most members' sentiments, and was deeply loved by almost all of them. With Mr Schroder, the relationship is that of business, rather than pleasure. Trouble lies ahead.

Mr Lafontaine did not utter a word yesterday. Locked away in his home at Saarbrucken, he seemed set to spend the coming months in internal exile, silently waiting for the call of his troops.

Mr Schroder's spokesman confirmed the Chancellor had tried to reach him yesterday but that Mr Lafontaine had not returned his calls.

His one statement on the affair, the resignation note to the party, ends on a chillingly cynical note: "I wish you success in your future work for freedom, justice and solidarity."

Rearguard action by the left was already evident yesterday.After hints that Mr Lafontaine's tax reforms would be dumped, Mr Schroder himself was forced to declare that this was not to be the case. The bill will be submitted to the upper chamber next week, as planned. Any adjustments would come later, he hastened to add.

There are certain to be many. The new Finance Minister, Hans Eichel, is a strong believer in taxes that encourage the creation of jobs. His first big task will be to reform enterprise tax, so that business in Germany has a chance against foreign competition.

"Hans Eichel has the knowledge and the ability," Mr Schroder said yesterday. "He is someone you don't need to spend ages talking to, he can take quick decisions." Surely there was no dig intended at Mr Lafontaine's famous vacillations.

Mr Schroder refused to "speculate" yesterday on the reasons for Mr Lafontaine's sudden resignation. It followed a dressing down by the Chancellor in front of the entire cabinet, and a long and stormy tete-a-tete on Wednesday.

But there was no hiding the policy differences between the two men, and the Chancellor's determination to set the party's agenda in future. The Social Democrats' programme will be "where necessary, further developed in open discussions", he pledged.

The relaunched Schroder government will be more voter-friendly, he promised. The first illustration of the new line is the reformed citizenship law, an issue which brought the Red-Green government of Hesse to a crushing defeat last month.

It will still be modernised, but not to the extent the Greens had wanted. They had proposed that new Germans be allowed to keep their old passports

On Thursday Mr Schroder cut a deal with the opposition Free Democrats. There will still be a reformed bill, but one more palatable to Middle Germany, with fewer double nationals floating about. In effect, the Chancellor extended his coalition to a party which used to prop up the Kohl government. This arrangement applies to only this bill, and no one is talking of precedents.

It is merely a coincidence that the Free Democrats are the party closest to business.

Nevertheless, the Greens, who have had disagreements of their own with Mr Schroder, read the situation as a gun pointed at their heads. Amid the drama of the past two days, they have been painfully well-mannered, rushing to plead their allegiance to the new order, and distance themselves from their old mentor, Mr Lafontaine.

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