The dilemma of reform consumed day-to-day politics for years, heightened political disillusionment, and undermined Germany's collective self-confidence. And to think it all started in 1990 with so much promise. Unification had fueled a boom in the German economy, and Germans were celebrating the coming together of their once divided nation and the attendant return of full international sovereignty. In the political sphere, an optimistic Zeitgeist ensured Helmut Kohl's reelection as chancellor in December 1990. This optimism quickly dissipated, however, when the breakdown of the GDR economy and clashes over East Germany's transformation posed substantial challenges to the Kohl government. So, too, did the increase in right-wing extremism and xenophobia that accompanied the arrival of growing numbers of ethnic German remigrants from the East [Aussiedler] and asylum-seekers. In 1994, despite the frustrations of unification, Kohl’s government was reelected once more. But by 1998, Kohl had been in office for sixteen years, and most voters believed it was time for a change. And with that change came the end of an era. Helmut Kohl will always be remembered as the driving force behind the modernization of Germany's Christian Democratic Union [Christlich Demokratische Union Deutschlands or CDU], as a committed European who led the negotiations for a single currency, and as the chancellor of unification. Still, his involvement in and handling of the financial scandal of 1999-2000, in which illegal contributions to CDU party accounts were revealed, cast a lasting shadow over his years in office.
In 1998, for the first time in the history of the Federal Republic, a government was elected directly by the voters, not through the coalition-building maneuvers of the parties. In contrast to 1969 – when some felt that the advent of a social-liberal coalition would shake the foundations of the republic – the losers of the 1998 election greeted the new coalition between the Social Democratic Party [Sozialdemokratische Partei Deutschlands or SPD] and Alliance 90/The Greens [Bündnis 90/Die Grünen] with democratic composure. Common to both transitions was the feeling of embarking on a new path. But the 1998 election marked more than just a change of government: a generational changing of the guard was also taking place at the top levels of the political leadership, with the wartime generation giving way to the postwar one. The so-called generation of '68 had earned its first political spurs during the rebellious 1960s and had made its way through the institutional ranks. Now some of its representatives, with Gerhard Schröder and Joschka Fischer at the fore, had come to power.
As was the case with the social-liberal coalition of 1969-1982, the red-green government was preoccupied with internal party squabbles and the often underestimated difficulties of day-to-day politics. Political roadblocks between the federal government and the states [Länder] hindered the implementation of reforms, just as they had done in the final years of the Kohl government. Often, the political process could succeed only when an agenda was presented by an informal advisory committee and then negotiated by an equally informal Grand Coalition between the two major parties, the SPD and the CDU. Virtually all of the major political undertakings of recent years – from the commission on reforming the armed forces, to the immigration commission, to the federalism commission and the pension and labor commissions – proceeded on this basis.
Despite all the difficulties, some long overdue liberal reforms were successfully introduced. These included a more modern citizenship law that allows dual citizenship under certain circumstances (1999), a domestic partnership law for same-sex couples (2001), and finally, after four years of negotiations, an immigration and integration law (2005). Important changes were also introduced in other areas, with reforms being made to the armed forces, the tax code, and the social welfare system. Chancellor Schröder, however, had promised in 1998 to make reducing unemployment the measure of his success. In recent years, nothing has occupied political minds more than unemployment figures. In a political show of strength on Schröder's part, Agenda 2010 – a multistep labor market program – was passed in March 2003. The program sparked nationwide protests above all because it called for cuts in unemployment payments and the merger of unemployment and welfare benefits (the implementation of the so-called Hartz IV proposal). In response, frustrated SPD members and trade unionists founded the Electoral Alternative for Labor and Social Justice [Wahlalternative Arbeit und soziale Gerechtigkeit or WASG], which established itself as a political party in January 2005. High unemployment, which stood at 4.8 million (11.6 percent) in May 2005, internal party disputes over economic and social policies, and one defeat after another in regional elections – with a particularly bad blow being dealt to the party in the traditional Social Democratic stronghold of North Rhine-Westphalia – led Chancellor Gerhard Schröder to call for early national elections. A fake vote of confidence, which Schröder purposely lost in the Bundestag, paved the way for early Bundestag elections in September 2005.