Analysis: Schroeder faces hard decisions

Iraq and German economy emerged as the key issues: Oakley

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BERLIN, Germany (CNN) -- CNN's European political editor Robin Oakley looks at how Gerhard Schroeder beat Edmund Stoiber in the race to be chancellor and what problems he now faces.

How did Gerhard Schroeder win?

Schroeder owes his victory to the performance of the Greens. He picked the right coalition partner. Stoiber's potential partner, the FDPs, had a disastrous election.

Schroeder 's line on Iraq -- ruling out German military involvement in a military campaign against Iraq -- was also popular. With it he also managed to outflank the former Communists and now they are out of the Bundestag having failed to get either three seats or five percent of the vote.

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Schroeder's tremendous play was on the issue of Iraq where he engaged the German public -- 80 percent of whom were telling opinion polls they wanted Germany to have no part in an attack on Iraq. Stoiber's message was more confused.

The Germans, a conservative people, do not throw people out easily and no German chancellor has failed to win a second term.

It is a majority, just, and Schroeder is back.

Will hard decisions now be made on the economy?

People were looking for a really decisive result to give a strong government the chance to tackle the rigidities in the labour markets. The Germans are wedded to their welfare state, including having the most days off in Europe.

It ought to change if the German economy is going to be lifted but I don't think it will.

There is nothing Schroeder has said that indicates big changes are on the way. I don't think he will even try to get deregulation through at the level required.

Everyone can see Germany needs reform but the Greens will be pressing against him and I don't think Schroeder will do it.

Where are the Greens after this election?

The Greens are the big success. Joschka Fischer has changed his views and he was the star of the election with a huge nationwide tour and the Greens caught the public imagination, partly because of the floods last month. Voters listened to the Greens saying this was down to global warming.

The German Greens are partly about ecology and used to be a pacifist party until Fischer won a battle between the realists and the fundamentalists and got the party to back German troops going into Kosovo.

While Schroeder's Social Democrats dropped a couple of percentage points the Greens went up from six percent to nearly nine percent. That has made the crucial difference for the red-green coalition.

We now expect the Greens to say 'we are a bigger partner in this operation and listen to us more Mr. Schroeder.'

We expect more from them on equality issues, a lot more on the environment and they will push hard on employment policies.

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