Driving for New Rights, States Challenge Germany's Federalism Regional Leaders Are Calling for a Redistribution of Power, Seeking Latitude That Others Worry Could Upset the West's Long-Successful Social Equilibrium Series: As a United Germany Girds for a New Age, Regional Leaders Argue for Rethinking the Distribution of Power between Bonn and the States. Part 3 of Five. * Part 1: A Penchant for the Status Quo * Part 2: Bridging the East-West `Mentality Gap' * Part 3: States Push for Greater Rights under Federalism * Part 4: Keeping the Economic Engine Competitive * Part 5: Wielding Foreign Clout without Inspiring Fear

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THE rapid transformation of Germany from authoritarian menace into stable democracy after World War II is one of the greatest sociopolitical achievements of this century, and arguably counts among the largest successes of modern history.

Underpinning Germany's metamorphosis has been the Basic Law, or constitution, that enshrines a federal system with carefully weighted checks and balances on central authority. The federal system, in turn, created the stability for the nation's remarkable postwar economic recovery.

But now - as a united Germany girds for a new age without cold-war-era constraints on foreign and domestic policy - the federal system is coming under pressure for change.

States are driving to win more rights from the federal government. Meanwhile, partisan politics could challenge federalism's status quo by creating legislative gridlock in the Bundesrat, or upper chamber of Parliament.

Discontent with the distribution of power is simmering in regions such as Bavaria, a southern state with a strong libertarian tradition. (Bavaria dances to its own polka, right.) Some state leaders argue post-cold-war conditions require realigning the federal system.

Defenders of the existing model counter that tinkering with the system could create long-term problems that affect everyone.

"No one should welcome this kind of struggle over power, least of all the economy," wrote Hans Peter Stihl, head of the Bonn think tank German Industry and Trade Council, in the Handelsblatt business newspaper.

"It {the economy} needs a reliable and an as uniform as possible legal framework to survive international competition," Mr. Stihl continued. Expanding states' rights would mean "Germany's industrial competitiveness would then be at the mercy of a clumsy bureaucracy."

A decrease in German competitiveness could have broad consequences. The Continent's mightiest economy will be pivotal in forging a prosperous European Union. But Bonn's ability to guide that process could diminish if its economy slips.

German federalism's roots reach back to the Thirty Years War of 1618-1648. The end of that war confirmed the emergence of powerful European nation-states, paving the way for the continental balance-of-power games of the next three centuries.

Germany served as the Thirty Years War's primary battleground. Afterward, the region developed as a buffer for great powers of the day, and a unified German state did not immediately take shape. Instead, inhabitants formed strong area ties as they rebuilt their war-ravaged societies.

THE war also gave rise to a yearning for stability, paving the way for authoritarian rule. But even as Bismarck's Prussia came to dominate Germany in 1871, regional interests had to be taken into account.

This century's two world wars smashed the old authoritiarian order, but postwar West Germany promoted the sense of regionalism in its federal system to prevent the return of a strong central power.

The wide reach of modern communications has diminished regional loyalty, but such allegiances have not faded entirely. "People identify with their individual state rather than Germany as a whole," says Prof. …