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A grand coalition headed by Ms. Angela Merkel, the leader of the Christian Democratic Union (CDU), has taken over the reins of government in Germany from the seven-year-long administration of Mr. Gerhard Schroeder of the Social Democratic Party (SPD). In the general election held in September, the center-right CDU failed to secure a majority. But with its ally, the Christian Social Union, it built the strongest coalition in the Bundestag, the lower house of Parliament. Separate negotiations between the CDU-CSU and the SPD, the second largest party, and smaller parties ended in failure. Although negotiations toward the CDU-CSU-SPD grand coalition also ran into difficulties, the end result is the first unorthodox change of government in Germany since the 1960s.

The Schroeder administration took over from the government of Mr. Helmut Kohl, which had realized the unification of East and West Germany. It emphasized social democratic economic policies at home and, together with France, was the key driving force for the European Union. Mr. Schroeder is a good friend of President Jacques Chirac of France. As the question of whether to invade Iraq created cracks in the EU, the two leaders drew a line between themselves and British Prime Minister Tony Blair, who supported participation in the war. With France and Russia, Germany formed a bloc against the United States and Britain.

At the same time, it must be noted that the Schroeder administration broke a postwar taboo in war-defeated Germany by opening the way for the dispatch abroad of German troops, as peacekeeping forces and within the framework of the North Atlantic Treaty Organization (NATO), to conflict-torn Kosovo, Macedonia and Afghanistan. For Germany, this represented a second historic departure from policies of the early postwar period, and followed the unification of East and West Germany. Yet structural problems, such as a record-high fiscal deficit and the worst unemployment since 1945 remain unsolved. The Merkel administration has inherited them.

The 143-page grand coalition agreement outlines policies for the next four years, and contains measures for achieving a fiscal balance. The measures include an increase in the value-added tax, a heavier tax burden on high-income earners, older age at which people can begin receiving pension benefits, and a reduction of these benefits. These steps are going to have a severe impact on national life. If they are not managed right, the public could become disenchanted and withdraw their support of the grand coalition.

As a result of the grand coalition negotiations, the Cabinet membership has been just about equally divided between the two parties. At first, Mr. Schroeder had insisted on the chancellor’s seat, but in the end he resigned and Ms. Merkel of the CDU took over as chancellor. In exchange, the SPD’s Franz-Walter Steinmeier, formerly an aide to Mr. Schroeder, was given the important post of foreign minister. In addition, the SPD got the ministry portfolios of labor and social affairs (concurrent with the vice chancellorship) and finance. The CDU-CSU assumed the posts of interior minister and defense minister.

The new administration has sustained two EU pillars: European integration and the Atlantic alliance. However, concrete measures on restoring relations with Washington and dealing with Turkey’s proposed EU membership — focal points of debate during the election campaign — remain hazy. Because the new foreign minister is a close friend of Mr. Schroeder, it is difficult to imagine a sudden change in foreign policy. A big difference of opinion still exists between the SPD (in favor) and Ms. Merkel (against) on Turkey’s EU membership.

The EU is going to have to deal with the new administration in Germany. Yet Britain’s term as EU president under the rotating system expires at the end of December, and France is gearing up for the next presidential election (2007) to choose a successor to Mr. Chirac. So it will probably be difficult for Ms. Merkel to build a close personal relationship with either Mr. Blair or Mr. Chirac.

Ms. Merkel has taken over the reins of government in Germany, the largest economic power in the EU, at a time of uncertainty in Europe. The new constitution, which was supposed to have become the basic law of the EU, is currently suspended in midair. Developments in Germany are bound to impact the direction of the EU. The first thing the Merkel administration must do is readjust its basic foreign policy with that of other EU members. For that purpose, Ms. Merkel has been visiting the capitals of EU nations since last week.

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