What next for Germany?

Neoliberal continuity seems the most likely outcome, suggests Mike Phipps

A month after the German parliamentary election results, the parties most likely to form the next federal government have finally agreed to start formal negotiations on a coalition. Germany’s aggressively neoliberal Free Democratic Party (FDP) will enter talks with the Social Democrats and the Greens to assemble a three-way coalition government.

After a faltering campaign by the governing conservative CDU, the Social Democrats emerged from September’s election as the largest party, despite getting only 26% of the national vote. It was helped by clear messaging, a campaign that prioritised social mobility and “respect” for the sacrifices of East Germans, as well as an element of incumbency – its candidate Olaf Scholz was the outgoing Vice-Chancellor and Federal Finance Minister.

The CDU, with its Bavarian counterpart the CSU, got their worst ever result with just 24%, a drop from 33% in 2017. The party was in trouble from the outset without Angela Merkel as a candidate.  The far right Alternative for Germany also lost votes.

Rising concern about the environment, particularly in the wake of this year’s unprecedented floods, saw the Greens get their best ever result of 15%. But the left party, Die Linke, put in their worst performance since they were formed in 2007.

The party has some hard thinking to do about its strategy. In a referendum in September, over a million Berliners voted for the socialization of corporate-owned housing. Like many people across the country, Berliners want socialist policies, but appear to distrust left wing parties and politicians.

Before the election, few rated the chances of the SPD. It had been the junior coalition partner in Angela Merkel’s government and had its worst general election result ever in 2017, only to do even worse in the 2019 European election. Its candidate for chancellor, Olaf Scholz, had lost a ballot among party members for the leadership to two largely unknown, left-wing contenders and was selected for this role in what was seen at the time as a face-saving move.

So who is the man likely to be the next Chancellor? As Germany’s Finance Minister, Scholz used emergency budgetary provisions to prevent mass unemployment during the pandemic. But he also cut welfare and put balanced budgets ahead of vital state investment.  

Scholz was a radical in the SPD Youth in the 1980s. But as interior minister of Hamburg from 2001, he was extraordinarily authoritarian, decreeing that the emetic ipecacuanha could be forcibly deployed on suspected drug dealers against warnings from the Hamburg Doctors Chamber that it could be fatal. Just a few months after this was introduced, a nineteen-year-old died after the syrup was brutally forced down a tube in his nose, against his resistance. Nobody was ever prosecuted over this and the practice was deployed over 500 times in Hamburg alone before the European Court of Human Rights declared forced emetics to be torture in 2006, reports Jacobin.

Scholz was General Secretary of the SPD between 2002 and 2004, enforcing Gerhard Schröder’s centrist agenda, including ‘New Labour’ style welfare reforms – Hartz IV – the biggest cut to social security benefits in post-war Germany. Like Blair’s reform of Clause 4, he also argued for removing any mention of “democratic socialism” from the party programme. In 2011, Scholz won the mayoral election in Hamburg, presiding over widespread police brutality against demonstrators during the 2017 G20 summit.

It was while he was mayor of Hamburg that Scholz was allegedly involved in the Cum-Ex scandal, a huge tax fraud involving several European countries that came to light in 2017. It’s estimated that the German treasury lost €440 million from the scam which involved the Warburg bank using complex tax loopholes.  Investigations showed Scholz had conversations with key players which he claimed not to remember. He used memory lapse as an excuse so often that TV comedians joked about his ‘loss of memory’.

Negotiations for a three-way coalition could last months. The new government may look at first sight like a move to the left. But much depends on the role of the FDP, who categorically ruled out tax increases in their campaign and want to cut corporate taxes. If the FDP get the finance ministry in the new coalition, a fiscal hard line could drag not just Germany towards an austerity-driven recession, but the entire Eurozone too. The German news magazine Focus said this has “half of Europe quaking in its boots”.

Many Germans feel they have been here before. Gerhard Schröder’s red-green coalition, from 1998 to 2005, saw the fracturing of the Social Democrats, with former Finance Minister Oskar Lafontaine leaving the party and co-founding Die Linke.  Meanwhile Schröder’s government pursued an increasingly neoliberal agenda, and notoriously the Hartz IV cuts to welfare, which pushed jobless people into poverty. Today’s SDP is cut from the same cloth and is unlikely to be much constrained by the Greens whose economic policy does not differ significantly from the neoliberal consensus.

One blogger predicted: “The SPD and the Greens want to form a coalition but the FDP will have to be persuaded by offering them the finance ministry and therefore stopping any rises in taxes or regulation on business and not allowing government debt to rise further i.e a degree of ‘austerity’.  The Greens want to accelerate Germany’s move towards reducing carbon emissions, but they don’t have any credible policies to achieve that within the restrictions imposed by German capitalism.  Hiking minimum wages and reducing the speed limit on German motorways is about as far as it will go.”

Formal coalition talks opened with the SPD and Greens abandoning their plans for higher income tax rates and a wealth tax. In return, the FDP dropped its long-standing demand for tax relief for high earners and companies and accepted an increase in the minimum wage to 12 euros. But the ‘debt brake’ – a 2009 constitutional amendment to limit the ratio of debt to GDP and a constraint on any government’s spending plans – will severely curtail the new coalition’s financial room for manoeuvre. Meanwhile the Greens appear to have abandoned their opposition to gas as a ‘transition fuel’ away from coal, thus locking Germany into further reliance on fossil fuel for the foreseeable future.

The talks are unlikely to settle who gets what government posts until near the very end. Currently both the Greens and FDP are battling to get the crucial finance ministry. Who gets it will have significant influence over the future direction of the new German government, but neoliberal continuity is still likely to be its principal feature.

Mike Phipps is editor of the Iraq Occupation Focus e-newsletter, available at https://lists.riseup.net/www/info/iraqfocusHis book For the Many: Preparing Labour for Power was published by OR Books in 2018.

Image: Olaf Scholz. Source: https://pixabay.com/photos/man-politician-olaf-scholz-hamburg-2990405/

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