BERLIN (AP) – Germany’s president agreed Thursday to dissolve parliament and hold early elections Sept. 18 that could give the country its first woman chancellor.

Chancellor Gerhard Schroeder had sought the early balloting, saying he had lost the mandate to govern after his Social Democrats badly lost a key regional contest May 22.

President Horst Koehler agreed, and set the date for the national vote.

Schroeder’s chief challenger will be Angela Merkel of the Christian Democratic Union, who is leading in the polls by some 17 or 18 points, giving her a chance to become Germany’s first woman chancellor.

Analysts say she would likely get along better with President Bush’s administration than did Schroeder, who forcefully opposed the U.S.-led invasion of Iraq.

Koehler stressed the election will be critical, saying Germany faced “giant challenges” in attacking its high unemployment rate – now 11.3 percent – and swollen budget deficits.

“Our future and the future of our children is at stake,” he said. “In this serious situation, our country needs a government that can pursue its goals with steadiness and vigor.”

Since winning re-election in 2002, Schroeder has struggled to push through limited cuts in jobless benefits and worker protections to get the sluggish economy going.

But his reforms, which included cutting long-term jobless pay in an attempt to prod people to accept jobs, have provoked opposition from within his own Social Democratic Party.

Schroeder, who became chancellor in 1998 and narrowly won a second term in 2002, welcomed Koehler’s decision and said that he would seek re-election as chancellor to get new support for his reforms, which he called “correct and necessary.”

“The majority of people in our land want new elections. This way they can decide themselves the direction in which our country will go,” he said.

Merkel has promised to create a more business-friendly environment by cutting the payroll tax for unemployment insurance, making up for it by increasing the value-added tax. The idea is to cut non-wage labor costs that discourage businesses from hiring.

But she has said she intends to keep Germany’s system of expensive welfare-state benefits, while vowing to make the country more competitive and efficient.

She differs from Schroeder by opposing European Union membership for Turkey, saying it would stress the union’s political and economic resources.

To get the new ballot, Schroeder deliberately lost a no-confidence vote July 1 by asking his supporters to abstain – a tactic he was forced to use because the German constitution does not permit parliament to dissolve itself.

By law, only the president, Koehler, could make the decision to hold new elections. That decision may face a court challenge from deputies who have said the government does not really lack a working majority.


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