TeaThe results of the German election were known within minutes. poll closed on 26 September. But what kind of government will be formed now is being decided, behind closed doors, in intense three-way coalition talks. With being humiliated by the Christian Democratic Union (CDU)/Christian Social Union (CSU) unprecedented defeat, Olaf Scholz of the Social Democratic Party (SPD) is the clear favorite to succeed Angela Merkel as chancellor.
The real question is the balance of power between the SPD’s two coalition partners, the Greens and the Free Democratic Party (FDP). A key issue in those talks is who gets a job in the finance ministry. Politicians may be oblivious to the outside Germany, and fighting over who controls the purse strings may not sound glamorous. But, in reality, it will decide not only the next government of Germany, but also the prospects of Europe.
Both the FDP and the Greens want a job in the finance ministry. In fact, during the campaign Christian Lindner made this a major issue, warning voters that the election was between him and Robert Hebeck, chairman of the Green Party and chief architect of the traffic-light coalition.
The FDP and the Greens are similar in some ways. They are two parties that fight for the votes of young people. Both take a strong stand on civil liberties and have little time to adjust with Russia and China. Both seek to modernize Germany’s crumbling infrastructure, especially when it comes to technology. But on climate, the Greens are far more serious than the FDP. The two parties also differ on social and economic policy – and they differ. Europe.
Lindner and the FDP stand for lower taxes, debt limits and a hard line toward Germany’s European partners. The climate crisis has to be addressed by private investment and carbon pricing. In contrast, the Greens put the climate first – and for this reason have advocated massive investment, lifting Germany’s “debt break”, and a pro-European policy that will continue the steps taken towards a normal, debt-financed investment policy in 2020. In these policy areas – where the gap between the Greens (and the SPD) and the FDP is greatest – the finance ministry is critical.
The German finance ministry matters, not just Germany. Between 2009 and 2017, Wolfgang Schaubl held the position of finance minister in Merkel’s governments. He became notorious as the pacemaker of the Eurozone crisis. Their constant demand for penance The debtor countries were put under tremendous pressure. At the climax of the crisis, in 2015, he went so far as to suggest that Greece a “take time out” From Euro Membership. Schaubl is a strong faith politician. For them the rule of law – including European treaties and fiscal rules – is the embodiment of Europe’s highest ideals, the greatest achievement of Western civilization.
But beyond Schaubl’s personal beliefs, there was also an inescapable political argument for his European power game. In Europe, a fiscal conservative at the helm of the German finance ministry has nowhere to hide. They have to show their colours. This, one should fear, would apply even more potently to Lindner as finance minister. Lindner has far less European faith than Schaubl. His economic views are conservative banter. But he is also a showman who must show that he and his party can stand up to two more left-wing allies. It would be nave to imagine that he could be safely sandwiched between a powerful Scholz-led chancellor and an environmental super-ministry in the hands of the Greens.
Scholz himself has shown how much a difference a progressive, pro-European one can make at the helm of the German finance ministry. Scholz is no economist, but he surrounds himself with a forward-thinking, internationally-minded team that has changed both the tone and content of the German economic policy debate. The Scholz ministry accelerated public investment and pushed for global tax reform. during the covid crisis massive spending. Above all, Scholz took the fragility of the eurozone seriously. Facing populist success in Italy in 2018, Scholz maintained a respectful silence, doing nothing to feed the outrage politics of Matteo Salvini and his right-wing nationalists. When the covid crisis threatened to tear the eurozone apart in the spring of 2020, Scholz decisively pushed for cooperation with the French, opening the door to success. next generation eu.
The absence of crisis in Europe at this time, a sense of purpose and constructive forward momentum, the ability to focus on investment and climate policy, should not be taken lightly. It depends, critically, on maintaining a delicate balance within German politics and between Germany and other major players in Europe. One should not deceive about the importance of that balance. Europe’s recovery is still fragile. Europe’s debt is high. The politics of Eurozone governance remains as unresolved as ever.
Against this background, Lindner’s prospect in the German finance ministry must be ominous. FDP finance experts vehemently insist that both Germany and Europe should return to the debt limit rules that were in place before the Covid crisis as soon as possible. For Germany, it may be possible. The SPD and the Greens may also agree to this if the FDP accepts large-scale investments through off-balance-sheet public banks. Any such program would be disastrous for Europe. Sixty percent of Eurozone citizens live in countries where the debt-to-GDP ratio now exceeds 100%. In Italy, it is more than 150% of GDP. Under those conditions, to force a return to Maastricht-era norms that required reducing debt until they reached 60% of GDP would be disastrous. This would prevent any public investment in the green transition and provoke a populist response that began in Italy.
The tender for extinguishing the fire has been done. Eight European governments have already called for a conservative consolidation of Europe’s finances from 2022. They are small states. Whether they prevail or not depends on the stand taken by Germany.
With power seemingly within their grasp, the SPD may be tempted to give their will to the FDP and hand over the finance ministry to Lindner. The Scholz team may feel they can call the shot from the chancellor. The FDP is trying to generate momentum behind the idea that the finances are theirs to ask. To fulfill this desire one has to play dangerous gambles. The German finance ministry poses a systemic risk to a conservative Europe. And, as Angela Merkel also found, it is very difficult for Berlin to make concrete policy if Europe is in trouble.