New government signals a more daring Germany
30 Nov 2021|

After eight weeks of negotiations, Germany has a new government. For the Social Democrat Olaf Scholz, who succeeds Angela Merkel as chancellor, the much-anticipated coalition agreement augurs nothing less than a revitalised progressive Mitte, or centre—and a far bolder Germany.

The coalition agreement was drafted behind closed doors, with little news leaking out. But it’s safe to assume that forging it was no easy feat. This is the first national-level three-party alliance since the 1950s, and the Social Democrats, the Greens and the liberal Free Democrats have plenty to disagree about.

Meanwhile, Germany is once again being pummelled by Covid-19—the fourth wave of a pandemic that has been exacerbated by popular complacency, administrative inefficiency and squabbling between state governments and the federal authorities. Add to that a darkening economic outlook and a looming migration crisis, and negotiators knew that they would be presenting the coalition agreement to a weary and wary public.

And yet, remarkably, party leaders produced a distinctly hopeful document. That much is clear in the title: ‘Dare to make more progress’—a clear allusion to Chancellor Willy Brandt’s 1969 speech to the Bundestag, in which he urged Germans to ‘dare more democracy’. But where exactly does Germany’s new government hope to make progress?

On the domestic front, several objectives stand out. Scholz’s government will seek to adopt a more flexible approach to the debt brake, which bars public authorities from excessive borrowing. It also promises to modernise the social security system, by replacing the unpopular Hartz-IV unemployment and welfare program with a less stringent Bürgergeld (citizen allowance) that includes incentives for education and training. And it proposes strengthening support systems for families with young children, raising the minimum wage to €12 ($19) per hour, and allocating €1 billion ($1.6 billion) for one-time payment to reward healthcare workers for their efforts during the pandemic.

Major structural reforms are on the agenda as well. These include phasing out coal and increasing the share of renewable energy from 45% to 80% by 2030, investing heavily in university–industry partnerships to encourage innovation and support start-ups, introducing major tax incentives for businesses investing in digital infrastructure and technologies, increasing the share of women in tech, and rapidly digitising public administration. The coalition agreement also commits the new government to investing in neglected public transportation and removing administrative impediments that slow the acquisition of permits and approvals.

Last but not least, Germany’s new leaders pledge to overhaul Germany’s immigration framework to make citizenship or residency easier to obtain, work to make housing more affordable, including by expanding public housing, and legalise the production, sale and consumption of cannabis.

Beyond Germany’s borders, the coalition agreement makes a full and clear commitment to the European project. For example, it calls for deepening the Economic and Monetary Union, and signals greater flexibility in managing the EMU’s stability and growth pact. It also expresses support for uniform European suffrage, with a binding lead-candidate system (the Spitzenkandidaten process) for selecting the European Commission president, and stresses the need to make it easier for the commission to act decisively when necessary—say, to safeguard the rule of law in member countries.

Similarly, the coalition agreement also expresses a clear commitment to NATO, though it leaves open some issues, such as the government’s commitment to the defence-spending target of 2% of GDP and questions relating to nuclear-arms control.

On foreign policy, the most notable shift relates to China and Russia. Apparently, the world should expect Germany’s new government to replace Merkel’s business-first strategy with a more assertive approach to authoritarian regimes. The future of the controversial Nord Stream II gas pipeline, which would bring gas directly from Russia, bypassing Ukraine and Belarus, may well be on the line.

Within Germany, the coalition agreement has received a predictably mixed reception. Those close to the three coalition partners have mostly welcomed it, though some on the parties’ fringes expressed greater disappointment and even suspicion. The Christian Democrats, preparing for their role as the main opposition party, criticised it severely, while the far-right Alternative für Deutschland and the left-wing Die Linke rejected it altogether.

Surprisingly, however, the German public has largely welcomed the agreement—and the sense of hope and renewal that underpins it. Merkel was known for her ultra-cautious leadership style. During her 16 years at the helm of Germany’s government, few reforms were enacted—and even fewer succeeded. Now, Germans seem to be ready for a more proactive government.

Of course, the coalition agreement is a political and not a legal document. Nonetheless, it is highly consequential as it will guide the efforts of the coalition committee—an informal body comprising ruling parties’ chief emissaries, which has assumed immense importance over the last several decades.

The coalition committee’s role is to ensure agreements’ implementation, including by managing the disputes and conflicts of interest that arise. And tensions are already emerging. For example, the emboldened environmental lobby laments that, despite the participation of the Greens, the agreement falls short on climate policy, and the business lobby, represented by the Free Democrats, fears tax increases and doubts the fuzzy financial projections underlying the agreement.

And an unlikely alliance of unions (demanding job security, higher pay and pensions) and business (applauding Scholz’s fiscal prudence) is wary of increased flexibility on EU budget policies. Finally, while the states support the new government’s promise of a long-overdue reform of Germany’s complex federalist system, some fear a federal power grab.

The bottom line, though, is that Germany’s new ruling coalition has advanced a much-needed vision for the country. But whether it can realise it will depend largely on the coalition committee’s political skill. If the coalition fails, Germany will risk reverting to its old habit of doing too little too late—an outcome that would jeopardise its position in Europe and the world.