Merkel's Shadow: Finance Minister Schäuble's Outsized Influence

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But this doesn't seem to bother Schäuble, whose goal is to keep his ministry working. At the same time, Schäuble must also protect himself against attacks from the FDP, as he is well on the way to becoming their most-hated CDU politician. "It is clear that Schäuble is supposed to clip our wings," comments one FDP budget expert. "His message is: The FDP dreams while the Christian Democrats govern."

FDP financial expert Otto Fricke recently reminded Schäuble of the terms of the coalition agreement: "If the agreement states that we will carry out the conversion to a graduated tax rate, that means -- at least for the FDP parliamentary group -- a fundamentally new tax system."

FDP state politicians are also irritated by the federal finance minister's digs. "Schäuble shouldn't just abide by the wording of the coalition agreement. He also has to stand behind the spirit of the agreement," says Jörg-Uwe Hahn, the deputy governor of the central state of Hesse.

Andreas Pinkwart, the FDP vice-chairman and deputy governor of the western state of North Rhine-Westphalia, says: "During the negotiations, Schäuble agreed to all items in the coalition agreement. Now he is making these moves toward cancelling things. If Schäuble now believes that he cannot implement the coalition agreement, the FDP will be happy to step up." Pinkwart adds: "As far as I'm concerned, what's important is what the chancellor says."

But what will Merkel say when it becomes clear that frugality and tax cuts are incompatible? When push comes to shove, will she support Schäuble or Westerwelle?

Equal Rights

The chancellor and the finance minister have a complicated relationship. When Schäuble read aloud to children in an elementary school near Berlin's Brandenburg Gate last Friday, he talked about the subject of equal rights all over the world. "In our country," Schäuble said, "we must make sure that men also have equal rights." He told the children that his boss is a woman, but that this doesn't present a problem in the least.

They have developed a viable working relationship. Schäuble was a loyal interior minister, and Merkel needs his experience. He has been a member of the CDU executive board for 20 years, and he was interior minister and chairman of the CDU/CSU group in the German Bundestag under former Chancellor Helmut Kohl. Schäuble is the grand old man of the Christian Democratic movement, and he is probably the only person in Merkel's cabinet who can negotiate on a par with the powerful CDU state governors. This is of no small importance for the coming months, when the government will have to push tax cuts through the Bundesrat, the upper house of parliament that represents Germany's 16 federal states, cuts that will tear large holes into state budgets.

For Merkel, Schäuble's appointment is also a gesture to her party. She is all too familiar with the criticism that she only tolerates yes-men, people like Interior Minister Thomas de Maizière and Chancellery Chief of Staff Ronald Pofalla, who are power brokers but are also men without their own agendas. Because no one really knows what their political convictions are, it is difficult for them to clash with Merkel.

This is not the case with Schäuble. One of the reasons his appointment as finance minister has been so well received is that he serves as a strong contrast to the vague Merkel, who doesn't like to commit herself. Schäuble, on the other hand, sparks the hope that the CDU will acquire a recognizable personality once again.

Last Hope

Schäuble finds this flattering. The office of finance minister is his last chance to end his political career on a dignified note. In the past, he was considered one of the great failures in German politics. At first, he was touted as Helmut Kohl's successor, but then he was forced to resign as CDU chairman in the wake of a scandal over political contributions. Later, he had his eye on the -- largely ceremonial -- position of German president, but Merkel thwarted his chances during political horse-trading with the FDP.

Now the two politicians are dependent on each other. Schäuble will only be able to end his career on a high note if Merkel does not force him to ruin the budget. The finance minister, for his part, has the means to damage Merkel. Schäuble's voice will carry weight if he begins to seriously organize resistance to the chancellor's and the FDP's tax plans, which would put Merkel in a tight spot. If that happened, the CDU state governors would take Schäuble's side, not the chancellor's.

Schäuble could become the voice of reason in the new coalition government, and this would be his opportunity to shine. When Merkel stood next to Westerwelle last Tuesday, Schäuble was in Brussels, where he was talking about saving rather than spending money. Sitting in the basement of the European Council building, he explained that the economic crisis is almost over, which will also spell the end of a period of big government spending programs.

Schäuble and Merkel continue to insist that there are no conflicts between them, and that they are merely fulfilling their different roles. Merkel, according to her staff, is responsible for holding together the coalition, while Schäuble, as finance minister, must show the FDP where the limits are. But what happens if, in the end, good relations with the liberals are more important to the chancellor than a strong budget?

"If necessary, the finance minister must accept it when the chancellor disagrees with him," says Schäuble. He pauses, and then he adds: "But he can't make it too easy for her, either."

DIRK KURBJUWEIT, RENÉ PFISTER, CHRISTIAN REIERMANN, FLORIAN SANKTJOHANSER, MICHAEL SAUGA, MERLIND THEILE

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• Part 1: Finance Minister Schäuble's Outsized Influence
• Part 2: Conflict over Tax Reforms
• Part 3: Clipping the FDP's Wings