by ALEX CALLINICOS
It's nearly a year since Gerhard Schroeder was swept to office in Germany. Schroeder, along with his closest European ally, Tony Blair, is a key leader of the so-called "Third Way."
The victory of the Social Democratic Party (SPD) and its Green allies marked the end of 16 years of right wing rule under Helmut Kohl. The European left was euphoric. Perry Anderson of New Left Review hailed the Red-Green coalition as marking "the potential emergence of a long run sociological majority for the left in Germany".
Today the Schroeder government is in full retreat. In elections two weeks ago, the SPD lost control of the states of Brandenburg and Saarland. This followed the governing parties' poor performance in the European elections in June.
Fundamentally, the Red-Green coalition has betrayed the aspirations that brought it to office.
After German unification in 1990 the Kohl regime presided over economic stagnation, mass unemployment and a succession of attacks on the welfare state.
A massive popular rebellion against this swept Germany's Tories from office in September last year. This mood was articulated less by Schroeder, a bland media friendly figure chosen to reassure big business, than the left wing SPD chairman, Oskar Lafontaine.
As finance minister Lafontaine announced plans to shift the burden of taxation from the poor to the rich. This infuriated Germany's bosses, who waged a strenuous campaign for his removal. He finally threw in the towel in March, harried by the media and boxed in by Schroeder.
There now seemed no obstacle to Schroeder pushing through his own version of the Third Way: "die neue Mitte", or the new centre.
Within a few weeks, NATO launched its war on Serbia. Joschka Fischer, Germany's Green foreign minister, vied with Blair and Clinton to justify the slaughter.
The alliance between Blair and Schroeder was thus sealed in Albanian and Serbian blood.
Barely had the war ended when the two leaders issued a joint document calling for "flexible" labour markets, corporate tax cuts, and welfare "reform". Schroeder rapidly followed this up with a $25 billion package of public spending cuts.
Pension increases are to be tied to the rate of inflation rather than rises in earnings, a measure that, since it was introduced by Margaret Thatcher in Britain, has done more than anything else to impoverish British pensioners.
Big business was delighted, particularly since corporation tax will be cut from 35 to 25 percent.
But the package has provoked massive opposition within the SPD and the trade unions.
Some 40 left wing SPD deputies have issued a statement denouncing Schroeder's "reforms".
But the immediate political beneficiary of Schroeder's policies may be the right. The main conservative party, the Christian Democratic Union, is now running ahead of the SPD in the polls by 45 percent to 36 percent. The German Tories have indeed been making the running politically ever since the Red-Green government was formed.
A vicious racist campaign led by the right wing Bavarian premier, Edmund Stoiber, forced the abandonment of plans to liberalize Germany's archaic and oppressive nationality laws back in February.
The fascist parties like the Deutsche Volksunion (DVU) are also benefiting from the government's difficulties. Two weeks ago, it won 5.3 percent of the vote in the eastern state of Brandenburg.
There will be elections in two other eastern states this month.
Eastern Germany swung massively to the left in last year's federal elections, making the SPD's victory possible.
But, as unemployment remains much higher there than in the west, the eastern states are fertile ground for Nazi recruiters. The DVU's millionaire leader, Gerhard Frey, is pouring money into the east.
All of this is rather strange. The whole point of the Third Way was supposed to be that it was popular, unlike Old Labour "tax and spend" policies.
But in Germany Schroeder's adoption of Thatcherite measures is simply driving voters into the arms of the Tories and the Nazis.
The only glimmer of light in the elections was provided by the left parliamentarian PDS, which won 23.3 percent of the vote in Brandenburg. The only way to counter the right is to challenge the free market policies demanded by the bosses.