Germany remains a beacon despite stresses

Election result was disappointing

For supporters of the values of openness, tolerance, international détente, a sense of responsibility towards the most vulnerable as exemplified by Angela Merkel’s decisive welcoming of a million mainly Syrian refugees in 2015, which 21st century Germany has come to stand for, the election result of September 24th was a disappointment. The Alternative fur Deutschland (AfD) won significantly more votes than expected at 13% and the Free Democratic Party (FDP) also achieved a major breakthrough from below the 5% proportional representation threshold to 10%. Once a champion of liberal values the FDP made its gains partly by appealing in a more palatable way to similar prejudices that drove the AfP: pandering to the tabloid view of Greece, the country which has suffered far the most from the euro zone crisis, by calling for it to be expelled from the euro zone; calling for the new wave of refugees to be sent back if and when conditions become possible (not necessarily wrong in principle but which would betray the promise made to them by Merkel); and suggesting that global warming and other environmental problems can to solved by technology alone, ie with no difficult political decisions or inconveniences to the public. Moreover, support for the Christian Democrat/Christian Social parliamentary group led by Merkel fell by 8.5 percentage points from the last election to a modest 33%, while that for the Social Democrats (SPD) fell by 5.2 points to 20.5%.

Even so, with the Greens at 8.9%, parties which clearly uphold the 21st century German values referred to above received 62% of the vote, while opinion polls suggest that, if there had been a personal vote for chancellor, Merkel would have received a little over 50% while the SPD chancellor-candidate, Martin Shultz, would have received abut 25%, a joint total of over three quarters. That is no reason for complacency. Other countries have shown how rapidly voting intentions can change.

 

Merkel’s policies have serious flaws

Moreover, both Merkel and her Germany have deep flaws (though that is surely true of any leader or any democracy, including the UK or US, at the time they were most admired). She has been too hand in glove with the powerful automotive lobby, by persuading other EU countries to ease planned environmental restraints. Even after the breaking of the scandal in which VW deliberately engineered diesel emission to tests to give misleading results, and it was revealed that tests in Europe in laboratories gave much more favourable results that actually applied on the road, she has continued to more supportive of a sector which has causing major damage to cardiovascular and pulmonary health.

With regard to Germany’s euro zone policy, Merkel has given free rein to Wolfgang Schauble as finance minister over the last eight years (he will be moved to become speaker of the Bundestag in the new parliament) to impose something of a rule of fear amongst indebted southern euro zone countries. In the early years of the crisis which broke in 2009 there was in my opinion little choice but for these countries to take tough measures to bring down deficits and to stop debt rising further but Germany should not have tried to put all the blame on southern Europe especially Greece and have admitted that the management of the euro zone had been deficient in allowing the situation to arise and that German and other banks should never have lent so much to Greece and other countries. The bail-outs were more to save north European banks and thus the stability of the euro zone as a whole than really to help the bail-out countries, Greece, Portugal and, now ended, for Ireland. Greece in particular introduced cut-backs in spending which brought about reductions in living standards unprecedented for any EU country in 60 years. There is a need to be fair to different governments and thus after an election to loosen conditions for an incoming government is unfair to the outgoing one but the conditions imposed on Greek economic and by implication social policy were very wide ranging and to refuse to give any consideration to proposals from the incoming government led by the left wing Syriza in January 2015, effectively gave the implication that as long as Greece was in its “debtors’ prison”, democracy in Greece was put on indefinite hold naturally,  led to understandable resentment.

Greece has clearly been bankrupt for the last eight years, and the fault was as much mistaken lending and poor euro zone management as foolish borrowing. Now, after the German election and with a new finance minister, must be the time for Germany, along with other creditor countries, to tackle the debt issue and give Greece a light at the end of the tunnel, just as Germany was given by debt reduction in the early 1953. There might be a request by Portugal for a more limited reduction in debt, but Italy and Spain do not have bail-out programmes and would not be justified in asking for debt relief.

President Macron has called for a euro zone budget. As the likely main contributor to such a budget, there is no chance of more than a very small budget but whether through this mechanism or others Germany should be willing to engage seriously in discussions on how to promote investment, for example by expanding on existing small but successful programmes led by the European Investment Bank and the European Investment Fund which promotes lending to small companies.

 

Difficult FDP seems essential to a coalition

In the medium term (probably before the next election in four years) Germany will have to find a replacement for Mrs Merkel. In the short time she has a very difficult challenge with forming the next coalition government. The SPD which has been the junior partner of coalitions for two Merkel’s four terms, very understandably wants to go into opposition, even though its disagreements with Merkel’s policies are not at present fundamental. Indeed precisely for this reason, it needs to establish an identity not seen as subservient to the larger coalition partner. As she would definitely not form a coalition with the AfD and it is very hard to see her doing so with the far left Die Linke, the only one left which would give her a majority is the so called Jamaica (black, green and yellow) coalition with the Greens on the left of the CDU/CSU and,  on the right, the FDP which performed much better that recently in the election.

Demands the FDP made in the election campaign such as sending back refugees in the future allowed in 2015 or expelling Greece from the euro zone should not be acceptable to Merkel. It seems that Christian Lindner, the young FDP leader who has led the party’s revival, covets the finance ministry but he could take an even harder line on Greece and the euro zone generally than Schauble did, given that doing appeals to a significant section of German voters. Unless he was willing to show a flexible approach, if he was appointed to this post he could undermine any attempt for Germany to work together with its partners in the euro zone. A possible alternative would be economics minister with a remit to improve conditions for small and medium sized enterprises, the source of most likely future growth in Germany’s economy.

 

Will the new German government look inwards or outwards?

Much will depend on the internal negotiations to form a new government, which will shape Germany’s future policies. For the moment, Germany as a broad polity still stands as a beacon in Europe and indeed the world. It is a liberal democracy committed to supporting the EU, NATO as a defensive pace and the UN and is building with difficulty but with hope an increasingly multi-cultural society. It is likely to remain a strong and stable country but whether it becomes more outward or more inward looking is an open question.

 

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