Kohl calls talks on paying for unification

CHANCELLOR Helmut Kohl yesterday called on Germany's political, industrial and trade union leaders to hold crisis talks on financing unification. The Chancellor stressed that the meeting must be held 'soon', in order to agree upon a 'solidarity pact' for eastern Germany. The sudden desperate search for new funds to secure public finances in the face of the ballooning costs of unification, coming after many months of repeated ministerial assertions that there would be no tax increases, has plunged the centre-right coalition into the worst crisis since unification two years ago.

Despite personally backing proposals for a compulsory investment loan from businesses and higher-earners in the west, Mr Kohl has failed to hold either his coalition partners, or even his own MPs, behind this controversial scheme. Instead, in a frenzy of mutual insults and denunciations, the coalition of Christian Democrats, Christian Social Union and Free Democrats, has given the public an unprecedented spectacle of helplessness and ineptitude.

The political paralysis in the face of a worrying economic situation has been exacerbated by failure to do anything more than talk about the asylum problem and the explosion of xenophobia in the east. Popular disillusionment with the government, and politicians generally, has soared. Mr Kohl and his CDU, with 35 per cent, are at an all-time low in the opinion polls, 14 points lower than when he first became chancellor 10 years ago. One seasoned Kohl aide said he had 'never experienced a crisis like this one'. Currently marking 19 years at the head of the CDU, Helmut Kohl is losing what traditionally has been the key to his political success: absolute control over the party.

Insiders speak of unprecedented calls, in a succession of high-level meetings in recent days of the parliamentary party and CDU executive, for the Chancellor to come clean about the extent of the economic problems and to 'address the people'. Furthermore, in the at times stormy executive meeting, Mr Kohl's authority was for the first time openly challenged by two of his formerly closest colleagues, Wolfgang Schauble, the head of the parliamentary party, and Volker Ruhe, the Defence Minister. 'This sort of thing just did not happen before,' said one shocked politician who was present.

The chaos in the coalition unleashed by the investment loan plan has strengthened the widespread conviction that a U-turn by Chancellor Kohl on tax increases is only a question of time. The Finance Minister, Theo Waigel, in a portentous break with his 'all is well' line, conceded that 'no one knows what the future looks like. Indeed, not even what the situation will be like in two or three years.'

The economic situation in the east and west is much worse than the government had budgeted for. Instead of the 'blossoming landscapes' in the east once forecast by Mr Kohl, there is only sporadically relieved desolation, illuminated by the fires of racist violence. In the west, the wheels needed to generate the vast subsidies for the east are turning ever more slowly. The economy shrank by 0.5 per cent in the second quarter of this year compared with the first. The problem of securing the medium-term financing of unification has finally overtaken the government. The idea of some form of hidden tax on the better-off in the west, be it called investment loan or something else, appears to be the reluctant answer.

It also represents an outstretched hand to the opposition Social Democrats, who favour more income tax on higher-earners. Mr Kohl knows that his government now cannot do without the co-operation of the SPD, and its majority in the upper house. The SPD leader, Bjorn Engholm, has offered Mr Kohl 'co-operation on specific issues'. He is also trying to pull his party towards the government on several of the most pressing issues, such as changing the constitutional clause on asylum. These important indicators of movement by both government and opposition have prompted frenzied speculation about a 'grand coalition of national unity' between the CDU and SPD. Given that Mr Kohl opposes the idea, the speculation also includes his imminent demise.

Whether such a denouement occurs, possibly within weeks, depends entirely on Mr Kohl's desire to fight back. So far, he is passively watching the disaster unfolding around him. 'It's a tragedy,' says a senior aide. 'He is doing nothing.' Mr Schauble is plotting a grand coalition - though whether he or anyone else feels sure enough to play the CDU's Brutus is far from clear. A considerable problem is that the potential partner, the SPD, is in a worse state. Mr Engholm's ability to force his rebellious party to accept his compromises is shrouded in doubt. Should Mr Kohl find his fighting form again, then his chances of recovering control in the party are good. 'MPs are panicking,' says a senior official. 'All they want is decisive leadership. It is in Kohl's hands now.' An indicator of whether the fight is on, or over, will come when Mr Kohl addresses parliament tomorrow on Germany's economic situation.