She will need more steel if she wants to make big changes, but the signs are that Merkel is projecting a softer line. Touted as a Teutonic Thatcher, the CDU leader is trying to look less strident. That may disappoint those clamouring for major upheaval, but Germany is not Britain in the 1970s and Merkel is not trying to win a war against the unions but to shake up a consensus grown rotten through complacency.

Her latest adviser is Heinrich von Pierer, the former Siemens chief executive, who is to head a “council for growth and innovation”. Von Pierer is a long-time party member, but no flag-waving rightwinger. He is unlikely to scare the horses — unlike Merkel’s choice of Paul Kirchhof as a potential finance minister. The Heidelberg University professor is well known for his proposal that Germany adopt a 25 per cent flat tax and had to be brought to heel by the CDU chief for expounding his tax- reforming zeal.

Merkel’s recipe of tax and labour reforms is a delight to the business lobby, but it is hardly radical. Employment taxes, a bugbear for Germany’s Mittelstand — the small and medium-sized industrial companies that are the country’s backbone — will be reduced and personal income tax will fall by three percentage points to 39 per cent. All this will be paid for not with public spending cuts but with a hike in VAT rates, a plan that is causing alarm among retailers and would delay further a recovery in Germany’s depressed consumption.

In the end, the strength of the CDU vote on September 18 will tell us whether a Merkel government will be old guard conservatism of the von Pierer variety or Kirchhof radicalism. Ironically, the former Siemens chief, who likes to boast that he is great pals with the unions and that he was the only German chief executive who was a member of a works council, was probably the man who did most to dismantle the 35-hour week. While politicians huffed and puffed about the need to pull up socks in the face of the Asian challenge, the Siemens chief told the workforce at a mobile phone factory that they faced a simple choice: work longer or the factory moves to Hungary.

The French Government accused Siemens of resorting to blackmail tactics, but the German workforce did not see it as a confrontation, just an unpleasant reality. Those who question whether Germany would be better off without the unions enjoying embedded seats on the board will have to answer another difficult question: what might those union bosses do if they are chucked out of the boardroom?

Storm blows oil supply off course

HURRICANE Katrina’s fierce blast had the effect of once again exposing America’s dependence on foreigners not only for crude oil but for petrol as well. Unfortunately, nobody seems much concerned that we in Europe are as exposed, but for different reasons.

The closure of a clutch of Gulf Coast refineries and the main pipeline that ships gasoline (petrol) to New England had the logical effect of pushing the price up 17 per cent.

It is hardly surprising, because America has a gasoline deficit. Few Americans drive diesel cars and, because a barrel of oil can produce only a limited quantity of products at the petrol end of the spectrum, the United States ships-in extra supplies. Some comes from Venezuela, hardly the most reliable supplier, and a lot comes from Europe, notably a couple of American-owned refineries in Wales.

By contrast, Europeans are consuming more and more diesel, but ever-tightening emissions regulations mean that there are few refineries that have hydrocrackers necessary to produce cleaner diesel fuels. Europe is importing substantial quantities from Russia, and Wood Mackenzie, the energy consultant, expects European demand for road diesel to rise by 25 per cent within ten years.

At the same time, thanks to diesel’s popularity, petrol consumption is falling, creating huge imbalances in demand and supply in the oil products industry. There is an urgent need for new plants that can convert more of each barrel of crude into useable diesel fuel, but only one new refinery is planned in Europe.

Oil companies would rather ship fuel than spend billions on ugly and unpopular refineries. But that means more ships and more dangerous cargoes on the high seas. It’s a difficult choice.

carl.mortished@thetimes.co.uk

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