The following is an edited transcript of the FT interview with Angela Merkel, Christian Democratic Union leader.

FT: You have been in France recently. Was it a productive journey?

Angela Merkel: I was in France. I spoke to the president, the prime minister and to the interior minister, but in the last case I was speaking to him in my capacity as chairwoman of the party – we are parties that are also linked by a partnership. I think that the bundling of the forces of the centre-right in France in the form of the UNP has been a successful step. For this reason, it was productive journey.

FT: Do you get on as well with Tony Blair?

Angela Merkel: In Europe it is particularly important that we build good relations to everyone who holds political responsibility because Europe can only be build together. The majority of decisions in Europe are done by unanimity. That’s why it is important to be to have good relations with all parts.

I believe that, just as the French-German friendship has traditionally been an important pillar of the EU, the Anglo-German relations should also be amicable and open. I can say on behalf of the CDU that this is something that we want to promote. Although the Tories, our British counter-parts, are not in power, so one has to try to work out something with those that are make British politics.

FT: Let’s assume that you win the forthcoming elections, what will you expect from the British EU Presidency? Do you think, for example, that the budget debate can finally be sorted out?

Angela Merkel: We are of course working towards winning an election – but we still do not know whether there will be an election or not.

We have of course expectations from the British presidency. On the one hand, the financial projection is on the agenda – we will see if this problem can be resolved or not. I think it is a right idea to stage a special summit, which would deal with the question of priorities of European politics. As politicians we have to react to the fact that many people do not feel that they can relate to the EU.

I think that the EU with the Lisbon agenda has put the right emphasis on growth and employment. Above all it is important to point out that we can only maintain our prosperity in Europe if we belong to the most innovative regions in the world. Today we are amongst the most innovative regions in some areas but not in sufficient areas.

Thus, the focus on this main political goal must become more visible in EU politics and to achieve this, we need a political impulse. It must be clear what the priorities on the agenda are. Personally, I think that for example the chemical directive in its present form does too much damage to the chemical industry – especially the medium sized businesses – and will hurt our worldwide competitiveness. As Europeans, we cannot put ourselves in the position where we put an additional burden on ourselves and then wonder why we are not winning the global race. This has to be carefully measured and I therefore think that this special summit would send out this message and this is something that I would welcome.

FT: Mr Blair thinks, before we talk about the European programme and the constitution, that the national governments have to do their homework as far as local economic reform is concerned.

Angela Merkel: It is a fact that, if I single out Germany, our rate of growth is too low and we have very high unemployment. This is especially deplorable since it is Europe’s largest economy. That is why part of our government programme is to show the alternatives over here.

At the last summit the heads of state and government have agreed on a period of reflection. Thus, there are other jobs to take care of now. This period cannot be a time of inactiveness. I have just explained my idea of how a constructive period of reflection, one that would send a clear message to the citizens of Europe: You should now what our priorities are. For Germany this means: Unemployment is one of one of our biggest problems.

FT: Can I ask a few questions about the current government? What do you think were Schröder’s main mistakes and what have you learnt from them?

Angela Merkel: Herr Schröder has conducted two electoral campaigns, and he is doing it again now, by not telling people what is really necessary. He keeps avoiding the difficult and uncomfortable issues, those that imply changes and therefore provoke discussions. People have become used to the broken promises of Schröder’s government. His own party basically did not support the government’s policies because they had always relied on what was promised in the election campaigns and then were surprised that other measures were taken. From this experience we have learned that in a big party it is important to have the necessary and often controversial discussions on policy issues such as the health system while in opposition. This allows us to come to decisions which will be part of our electoral programme so people now what to expect, once we are in power.

FT: A frequent argument is that Germans are not capable of reforming themselves.

Angela Merkel: I would say this is utter nonsense. The people in East Germany have lived through so many changes in the last 15 years like never before in the country, and they did this often with great enthusiasm. But in the West we also have a high degree of transformations. Everyone who is able to work today does so under very different conditions. The willingness to learn new skills is very high. If you ask people what they are prepared to do in order to adapt to globalisation they say “I am willing to learn new skills”. Parents today do no longer expect there children to come and work in the family business but they urge them to go for new careers.

It is nonsense to say that Germans are unable to change. The reason why we do not have the Transrapid high speed train in Germany is not because Germans would not accept new railways to be build. It has to do with the political environment and the very slow decision making process. In this respect politicians can change a lot to deliver changes much faster to the people. The question is not whether we are able to change but whether we are changing fats enough. There is still some convincing to be done. That is what we want to do in the campaign.

FT: Do you think that one of the problems is the lobby groups who keep talking the country down?

Angela Merkel: The problem is, of course, that these interest groups are all asking for changes, but their enthusiasm for change rapidly disappears when it affects the core of their own interests. Everyone wants a more simple tax system. But if this means that certain tax breaks have to be cut, people are no longer so enthusiastic. That is why everyone in politics, and we do it, must make sure that they do not depend on one single interest group. A good compromise is one where everybody makes a contribution.

FT: Do you think that German politicians need to distance themselves more from all these lobby groups which are stronger here than in other countries?

Angela Merkel: Politicians have to be committed to people in equal measures. The unemployed have the weakest lobby. That means their only lobby are politicians so we must make sure we have as few unemployed as possible. On the other hand we see how many people withdraw from the unions and employers organisations. As politicians we have to make sure that we remain to be a party with a broad public appeal.

FT: Should you not warn the public that it may take up to three years to create jobs so that people do not expect change to happen now?

Angela Merkel: I am not one of those who said that there would be instant results – neither in relation to Hartz IV nor our own government programme. In the case of Hartz IV, we had always said that Hartz IV would not create jobs.

FT: Economists say that by dropping the cost of wages by one per cent, there would be an increase of around 150,000 new jobs. What do you think about this?

Angela Merkel: I find it interesting. But I also think that people over estimate how accurate such prognoses are.

FT: In East Germany, wages are lower and the working hours are more flexible, the trade unions are weaker. At the moment, West Germany is used as a benchmark against which to measure East Germany. Why don’t you turn things on their head and say: “Those who invested in the East – Porsche, BMW etc – did not only go East because of subsidies – that was obviously a reason – but there were other factors. Why do you not take East Germany as a model for what Germany could be like?

Angela Merkel: I do not want the national level of income to sink to the level in the East. We are still at the same stage we were at at the beginning of the nineties, when people told us: “Unity is the equalization of living standards in Germany.” The past fifteen years have shown us that change has also been on going in the West.

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