What the new coalition in Germany means for the country’s future

Merkelism – if defined as the art of compromise and prevarication – may indeed have had its day, writes Mary Dejevsky

Germany’s new traffic light coalition, with the chancellor-in-waiting, Olaf Scholz (centre) (AFP/Getty)

True to its reputation abroad, if possibly no longer in the eyes of its citizens, Germany is well on the way to smoothly acquiring a new government. With scarcely a wave being made, the Social Democrats, the Greens and the Free Democrats have concluded an agreement that paves the way for Germany’s first three-way coalition government for nearly 70 years. Subject to the – likely – approval of the parties’ members, the post-Angela Merkel era begins early next month.

From the apparent good nature of the negotiations – compared with the public disagreements that preceded the formation of Merkel’s last coalition – to the apparent efficiency of the transition, the forecasts have been predominantly for continuity. After all, the chancellor designate, Olaf Scholz, was Merkel’s deputy in the outgoing government and, as finance minister, held the purse strings. At 63, he is not so very much younger than Merkel (67), and the presence in the coalition of both the (economically left-leaning) Greens and the (free-market) FDP should ensure a balance that will not scare any horses.

However, I do wonder if the degree of continuity from Merkel might have been exaggerated: whether out of wishful thinking on the part of Merkel’s many fans abroad or because the chancellor-in-waiting – whose party’s victory was wafer-thin – knows better than to create uncertainty by flaunting his ambitions before he is actually sitting in the chancellor’s chair.

Contrary to a widespread view outside Germany, the first place for Scholz’s Social Democrats at the September poll did not reflect any broad enthusiasm for continuity; it was rather a vote for change after what many voters saw as a stultifying period of domestic stagnation. Indeed, Scholz had to adjust his campaign pitch away from presenting himself as the natural Merkel heir and on to the differences.

Merkel’s (belated) personal support for the centre-right CDU/CSU candidate, Armin Laschet, on the campaign trail brought him no advantage whatsoever. Laschet’s close second place reflected voters’ loyalty to the party, not to the candidate. With Scholz, it was the other way around. As the campaign progressed, it appeared that voters were drawn to him over and above any loyalty to the party. In the later stages of the campaign the posters read: “If you want Scholz, vote SPD.” And they did, or at least in sufficient numbers to make the SPD the largest party in the Bundestag.

What follows from this, and is reflected in the 177-page coalition agreement, is that this so-called “traffic light” (red, yellow, green) government is going to be further to the left in many respects than any government Germany has had, not just for the past 16 years of centre-right led administrations, but probably than the last SDP-Green coalition led by Gerhard Schroeder, which introduced what were seen as cruel-to-be-kind work and welfare reforms in 2003. These were reforms that arguably cost Schroeder the 2005 election, but also made life easier for the “grand coalition” – the centre-right/SPD government – of Merkel that followed. The hard work of welfare reform had been done.

Scholz’s own agenda and the composition of his government – which includes the Greens – is not the only reason why this new administration will lean more to the left than some might expect, however. The pandemic has influenced policies in many developed countries, not just Germany. Scholz’s campaign – like many of the autumn campaigns in Europe this year – was coloured by the extent to which the Covid-19 pandemic had highlighted social inequality.

It is not at all clear that, without the pandemic, the SPD would either have topped this year’s poll or would now be facing so relatively little opposition to its proposal for a substantial rise in the minimum wage (from €9.60, or £8.10, to €12 an hour). Germany came late to the whole concept of a minimum wage, and its introduction, six years ago was hugely contested. What happens when the measure goes before parliament remains to be seen, but its very presence in the coalition agreement means that it has the acceptance of the FDP and is unlikely to be voted down.

The minimum wage is, of course, a detail in the overall political order of things. But it is a symbolic one in terms of the direction and priorities of Germany’s new government. Other pledges include building nearly half a million more affordable homes a year, and speeding up digitisation – where Germany surprisingly lags behind much of Europe.

A big emphasis is, predictably, placed on combating the climate crisis, with a new push for renewable energy, and deadlines for ending sales of new petrol and diesel vehicles. The end of the coal industry is also to be brought forward from 2038 to 2030 – a specific manifesto promise made by the Greens.

Such policies might sound expensive – and this was a liability for the Greens at the ballot box. But Scholz will have a double buttress against critics; first because he was finance minister in the last Merkel government, so should know the lie of the land, but more to the point because the free-market FDP is signed up to the three-party agreement and the party’s leader, Christian Lindner, is set to succeed him in the finance minister’s post.

The new government also comes with a collection of socially liberal policies, including legalising (and regulating) sales of cannabis, reducing the voting age for European elections to 16, and – a big change this – allowing international residents to obtain German nationality without having to give up their existing citizenship, dual citizenship having long been a bone of contention in Germany. It is probably fair to say that a government led by the CDU-CSU would never have countenanced any of this.

Nor, by himself, might Scholz, who is of the Merkel generation and comes with a classic German chancellor’s CV, as a former mayor of Hamburg and a string of previous government posts. His two lieutenants, however, are of a different generation. The Greens’ co-leader and the likely foreign minister, Annalena Baerbock, is 40. The FDP’s Lindner is 42 and at 21 was his state’s youngest MP. The political guard in Germany is changing, if it has not already done. This is not a new Merkel government under another name.

There is likely to be less upheaval in foreign policy, but changes in emphasis could lie ahead. The agreement stresses relations with France – a nod perhaps towards the coming French presidential election, but maybe also a revival of the German-French “dynamo” in the EU. The new government could also take a tougher line on China and Russia, with Baerback herself – and Germany’s Green Party – being more hawkish than might be assumed, something that largely reflects the primacy in the party’s thinking of human rights.

On the vexed question of defence spending, a neat sleight of hand combines defence, diplomacy and development to account for 3 per cent of GDP, so fudging the question of how soon Germany will reach the 2 per cent of GDP prescribed by Nato for defence. Another vexed question, though, appears unresolved, however. The big issue of the moment – when, or even whether, the new Russia-Germany gas pipeline, Nordstream-2, will come into operation – is not mentioned. It is supported by Scholz and opposed by the Greens.

In all, a slight shift towards principle can be seen in foreign policy, that nonetheless leaves most of Merkel’s pragmatism in place. Domestically, there could be much greater change, with the prospect of a left-ish, youth-orientated, green-shaded government, which also favours free enterprise and respects stringent fiscal rules. If it can be made to work, that is not such an unpromising stance for any European government in the circumstances of today.

It is also not a bad reflection of the way Germany voted, offering a chance – just a chance, it is true – that Olaf Scholz could buck a long-standing trend. A central criticism of the German system is that it tends to produce more or less similar centrist coalitions that leave the country with no real parliamentary opposition and all the alternatives out in the cold.

This red, yellow and green government will face a largely centre-right opposition that could have the numbers and the coherence to do its job. Merkelism – if defined as the art of compromise and prevarication – may indeed have had its day.