Is Germany ready for a reforming Merkel?

German voters have handed Chancellor Angela Merkel another four years in office and a mandate for change. But will the country wake up with an election hangover if she now becomes a vigorous conservative reformer?

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Four years ago, Angela Merkel nearly lost the 2005 election after campaigning on a platform for radical economic reform. Her conservative Christian Democrats were forced into a political marriage of convenience with the centre-left Social Democrats – essentially condemning her to govern by the lowest common denominator.

On Sunday night, she was finally freed from her unwieldy grand coalition, as German voters gave her the opportunity to forge her preferred alliance with the pro-business Free Democrats (FDP). But after running a minimalist campaign with few concrete policy details, it was not immediately clear whether she would now attempt to take up the mantle of radical reformer once again.

In her victory speech Merkel said she wanted to be the “chancellor of all Germans,” and in a discussion with the heads of all five major political parties she even mentioned her supposedly good ties to the country’s trade unions. Have four years of co-habitation with the SPD shorn Merkel of her conservative reformist zeal?

She will undoubtedly be prodded by both the FDP and the conservative core of her own party to swing to the right after placating the Social Democrats. That could mean unpopular welfare cuts, loosening of job protection measures and changes to the country’s health system. It remains to be seen whether the promise of lower taxes will be enough to keep Otto Normalverbraucher – as Joe Sixpack is known in Germany – off the streets.

Certainly the biggest losers of Sunday’s election – the Social Democrats – will have little incentive to stop a fierce non-parliamentary opposition from mobilising after posting their worst result in Germany’s post-war history. Indeed, the SPD and the other two left-wing parties in the Bundestag – The Left and the Greens – will now likely do their utmost to rile public discontent against the new conservative-FDP coalition.

Perhaps sensing this, FDP leader Guido Westerwelle accused them of scaremongering even before the new coalition had taken power: “It’s inappropriate to be stoking fears simply because a new government is being formed.”

But even though Germans gave the Free Democrats their best election result ever with around 15 percent of the vote, this remains a country with a deep distrust of the sort of unbridled capitalism that sparked the global financial crisis last year.

The FDP is far from a true libertarian party, but to many Germans it represents “neo-liberal” forces responsible for outsourcing jobs and eroding the country’s once cosy welfare system. And the ferocious hostility to the economic reforms implemented by former Chancellor Gerhard Schröder in 2003 – widely considered overdue and necessary – continues to fester and simmer in a large swath of the populace.

Should Merkel decide along with the FDP that Germany needs a serious overhaul to create jobs and get Europe’s largest economy back on track, she could quickly discover her fellow citizens preferred her muddled leadership style tempered by the Social Democrats after all.