Leading article: Enter: Ms Merkel's 'Grand Coalition'

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The Independent Online

After more than a month of doom-laden predictions, brinkmanship and tantrums, Germany almost has a government. Angela Merkel's centre-right alliance and the Social Democrats have finalised the terms of their "grand coalition" and are expected to endorse the agreement today.

The arrangement is, as a senior Social Democrat put it at the weekend, a marriage of convenience, not a love affair. For all the drawbacks, however, a marriage of convenience - consensual, pragmatic and purposeful - could be just what Germany needs. Indeed, it is effectively what Germany voted for all those weeks ago when Ms Merkel and Chancellor Schröder ended up in a virtual dead heat, but without sufficient MPs to govern.

Germans clearly favoured change, but not in as rapid or untrammelled a form as Ms Merkel and her CDU-CSU alliance had promised. With unemployment rife, voters were understandably reluctant to jeopardise their social safety net for Ms Merkel's free-market entrepreneurialism. Gerhard Schröder's warnings about inequality struck a chord.

The agreed programme balances the need for reform (which is overdue) with a recognition of German voters' fears. If there is a dominant theme, it is the laudable imperative of sound financial management. As Ms Merkel, who will become Germany's first woman chancellor, said with house-keeperly briskness: "Nobody on earth can change the maths."

Otherwise, it is a matter of equal pain, rather than equal gain. Those advocating deregulating reforms in the manner of New Labour have some of what they wanted in the form of less job protection and a higher pension age. Those concerned about social inequality in a more market-orientated system can cite the proposed tax rise for the highest paid. An increase in VAT, which was a controversial plank of Ms Merkel's election manifesto, will be used partly to reduce employers' insurance contributions.

Ms Merkel has already been criticised by her own side for conceding too much to her Social Democrat partners. In front-loading the pain and spreading it around so liberally, however, the new Chancellor has been canny. Like President Clinton in his first term, she has taken the political risk of raising taxes, gambling that the economy will strengthen thereafter. But she has an advantage over Bill Clinton, in that she leads a coalition.

The Social Democrats are now complicit in the austerity measures. Were they to flounce out of the government and force a new election, they would share the blame for the tax rises. If they stay and Germany's economy improves, Ms Merkel, as Chancellor, will take the credit. The deal for her, and for Germany, is a good deal better than it may look.

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