The New German Zeitgeist.(World Affairs)

Byline: Stefan Theil; With Andreas Tzortzis in Berlin

Angela Merkel's agenda is all but finished. Germans now prefer "social justice." Whatever that means.

Born in the workers' conflicts of the 19th century, Europe's great labor parties have struggled to modernize in the face of globalization and the dysfunction of the West European-style welfare state. Yet some shrewd politicians have managed to do it. Britain's New Labour ditched an ideology of redistribution; Nordic socialists helped deregulate labor markets; German Social Democratic Party (SPD) Chancellor Gerhard Schroder enacted tax cuts and tightened jobless benefits -- to much grumbling in his still very traditional party. But while the U.K. and the Nordic countries continue to thrive, last week, the German grumblers won, effectively burying the reform agenda of the Schroder years and dooming German Chancellor Angela Merkel's attempts at further change.

Merkel's center-right party, the Christian Democrats, had joined forces with the SPD two years ago in a grand coalition and promised to stay Schroder's course. But she stopped pushing for reform, and her partner is reverting to its old form. At an emotionally charged SPD Party Congress in Hamburg at the end of October, delegates voted for a party platform that calls for a new democratic socialism in Germany that would soothe the souls of Social Democrats after years of hard-to-swallow reforms. They instructed their own SPD Labor minister in Merkel's coalition government to boost unemployment benefits for older workers. Railing against foreign "locust" investors, they vetoed the SPD Transportation minister's plans to privatize the national railway. They demanded that temporary employment agencies, whose liberalization under Schroder has created several hundred thousands of jobs, be prohibited from undercutting wages of permanent staff.

Yes, party conventions are designed to warm the heart of the base. Real decision-making typically takes place elsewhere. But this Congress brought to an end the SPD's years of split-personality disorder, in which the leadership defended its own reform decisions while the rank and file protested the perceived inequities of those decisions. That conflict had left Europe's most venerable left-of-center party in crisis. Membership is down by one third since the start of reforms, and support is only 26 percent. Now that the Schroder agenda is finally buried, the party -- under its chairman and now all-but-sure candidate for chancellor in 2009, Rhineland-Palatinate Gov. Kurt Beck -- can once again wholeheartedly campaign for "social justice" as ...