German President Horst Koehler gave Chancellor Gerhard Schroeder the early election he sought, agreeing Thursday that Schroeder's government no longer had the support it needed to govern after a vote of no confidence.
Koehler said in a televised address that he was dissolving parliament for an election that would be held Sept. 18.
Koehler said 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," he said.
Schroeder welcomed Koehler's decision and said that he would seek re-election as chancellor to get new support for his economic program, 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.
Most observers had expected Koehler to give the green light, and the major parties have already launched their campaigns. So far, Schroeder's Social Democrats lag behind the conservative opposition led by Angela Merkel.
Since winning re-election in 2002, Schroeder has struggled to push through limited cuts in jobless benefits and worker protections in an attempt to get the sluggish economy going. But his reforms, which included slashing long-term jobless pay in an attempt to prod people to accept jobs, have provoked opposition from within his own Social Democratic Party.
After his party badly lost a key regional election on May 22, Schroeder said he had lost his mandate to govern and called for new elections. To get them, he deliberately lost a no-confidence vote July 1 by asking his own supporters to abstain — a tactic he used because the German constitution does not permit parliament to dissolve itself.
By law, only 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.
The government coalition of Schroeder's Social Democrats and Greens has a narrow 303-seat majority in the 601-seat Bundestag, or lower house. The no-confidence motion was greeted with skepticism by some members of the governing coalition and by constitutional scholars, especially after Schroeder's party leader, Franz Muentefering, said the government still had the party's support.
Merkel and her Christian Democratic Union are leading in the polls by some 17 or 18 points, giving her a chance to become the first female chancellor. She has promised to create a more business-friendly environment by cutting the payroll tax for unemployment insurance, making up for it by increasing 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 it more competitive and efficient.
She differs from Schroeder by opposing European Union membership for Turkey, saying it would overstretch the union's political and economic resources. Analysts say she would likely get along better with the Bush White House than did Schroeder, who forcefully opposed the U.S.-led invasion of Iraq.