German foreign policy could be Scholz’s biggest puzzle | See
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The new German government is full of contrasts.
Composed of a political mix of Social Democrats, Greens and Liberals, it marks a clear break with the increasingly cozy Grand Coalitions of Angela Merkel. However, with former Finance Minister Olaf Scholz now appointed Federal Chancellor, Germany has continuity at the top.
The government has an ambitious and progressive agenda for Germany which, if successfully implemented, will radically change the country and the European Union along the way.
For only the eighth time since the founding of the EU in 1957, a new German Chancellor has taken office. Olaf Scholz heads the first tripartite coalition to rule Germany as a member state. This shift from two-to-three arrangements in Berlin reflects the same erosion of the great volksparten already seen in many other European countries.
Multi-party coalitions are inherently less stable than governments with only one or two groups, making Scholz’s domestic political power base weaker than that enjoyed by the former German rulers. He is therefore less likely to hold the post of Chancellor for as long as Angela Merkel, for example, and may not acquire the European gravity and the longevity in the office accorded to its predecessors. Scholz will find it difficult to replicate Angela Merkel’s recent political domination in the European Council.
But, at the same time, Scholz, as social democratic leader, enters the Chancellery at a rather favorable moment, while the center-right European People’s Party (EPP), the political formation traditionally preponderant in European politics , is a hollow shell of his former self.
Now derived from national leadership in all major Member States, the EPP is fighting to maintain the control over the EU political process it has enjoyed over the past decades.
Instead, Scholz, along with his socialist colleague Pedro SÃ¡nchez in Spain and tax militant leaders in France and Italy, sit at the end of the table in major capitals.
The next 18 months will see key negotiations in Brussels around, among others, reform of fiscal rules (officially, the Stability and Growth Pact), the long-term sustainability of the â¬ 750 billion EU stimulus fund (Next Generation EU) and the huge investment must decarbonise and digitize the entire economy. All of this offers Olaf Scholz a rare opportunity to set the EU’s long-term agenda alongside what appear to be – on paper, at least – like-minded EU leaders.
In addition, Scholz becomes German Chancellor at a time when the EU – as usual – seeks German leadership, although today the challenges facing the bloc are very different from the internal financial and migration crises so common in the country. Merkel era.
Today, Germany and the EU face high external threats from a Increasingly belligerent Russia, a rising China and the United States ever more concerned with mobilizing their political and military resources in Asia. This inventory will require a new kind of political leadership from Scholz and the end of Germany’s long tradition of alleging “historical reasons” for simply focusing on exports and avoiding engagement. in thorny political and military disputes around the world.
Given the very different overall visions within the SPD, a party containing a powerful pro-Russian faction, compared to both the Greens and the FDP, for whom human rights, democracy and environmental issues are at stake. far more important role, dramatic clashes within the coalition over the direction of German foreign policy will be inevitable. Keeping the three parties together on various international crises may prove to be Scholz’s biggest political puzzle as Chancellor.
Nationally, the new German coalition – made up of social democrats, who campaigned mainly on social issues such as minimum wages and higher pensions; the Greens, who pushed for more ambitious climate investments; and liberals, always keen to avoid higher taxes and larger deficits, must transcend traditional cracks in economic policy.
A coalition of traffic lights simply cannot, simply by virtue of its membership, become a traditional free market and liberalized government, nor a government that pursues a conventional desire of the 20th century left for more state intervention.
In contrast, Scholz is to chair an executive that will strengthen the financial and lending capacity of major German state-owned enterprises, such as the KfW development bank, enabling him to leverage public money outside the usual debt brake. Combined with the technical changes in the implementation of the debt brake and its continued suspension during the pandemic era throughout 2022, the cabinet will manage to find the additional resources needed for its ambitious climate goals. , digitization and social policy.
This new funding will not be done in the original austere spirit of the German debt brake and is certain to invite legal challenges to the Constitutional Court. Yet this reflects a new political and economic reality and shows that Olaf Scholz’s Germany has definitely emerged from the Great Recession. The industrial power today has different needs and fiscal capacities to face a European economy which risks falling into a Japanese era of permanent stagnation and low interest rates.
It seems clear that such a national budget about-face in Germany, even if it is legal under the existing debt brake, will at least have some loosening effect on the parallel negotiations around the fiscal rules of the EU. EU.
Perhaps this is what Olaf Scholz wanted in the first place: to change Europe as he changes Germany.
Jacob F. Kirkegaard is Principal Investigator at the Peterson Institute for International Economics (PIIE) and the German Marshall Fund (GMF).