The entweder-oder question
Dear Reader,
After Olaf Scholz came in for hefty criticism over his plan to hold a snap election five months after the collapse of his government, we now have certainty on the date.
Germans will go to the polls on February 23rd. It is not exactly the moon landing but it is the earliest date that the country’s lead-footed bureaucracy could cope with.
Yesterday, we were given our first taste of what the parties are going to try to sell us in the coming months.
Addressing the Bundestag over the collapse of his government, Scholz quickly moved into campaign mode.
One question, he said, would be fundamental during the election: Should Germany finance Ukraine at the expense of its own citizens and its own future?
"My answer is 'no'!’” Scholz declared. “It can’t be the case, it must not be the case, that support for Ukraine means making cuts to pensions, health care and elderly care.”
He, Scholz, has already found a way to secure domestic welfare and international security “without playing the one off against the other.”
Unfortunately his pesky coalition partners from the Free Democrats rejected this plan - so he had to sack them. Now the German public has the chance to vote him back in with a big enough majority to enact this masterplan.
“I will never force voters to choose between security abroad and good jobs and modern infrastructure at home, or between our army and stable pensions," he promised.
His opponents on the other hand want to cut welfare and thereby "give fuel to populists and extremists."
Which begs the question of how a country which already has one of the highest tax burdens in Europe can afford all these commitments.
“I’m very proud of the fact that Germany is good with its money and that we have a public debt level that is marching in the direction of 60 percent of GDP,” Scholz declared.
But, he continued, in times of crisis you can't stick so dogmatically to borrowing rules. When he talks to G7 leaders from Japan (public debt level over 260 percent ed.) or the UK (public debt level at just under 100 percent ed.) none of them would dream of cutting pensions so that they can modernise their country’s infrastructure.
There is just one problem with this pitch: Scholz is contradicting his own most famous words.
Three days after the Russian invasion of Ukraine began, he announced a Zeitenwende, a new era. In that speech he described how we had entered a new world in which powerful states would once again try to rule by the principle that ‘might is right.’
This world would require adjusting to permanent new realities. As Scholz stated with due pathos: “The world afterwards will no longer be the same as the world before."
Later in 2022, he expanded on his concept of the Zeitenwende in an article for the magazine Foreign Affairs. “I believe that we are currently witnessing the end of an extraordinary phase of globalisation and a historic change,” he wrote, saying that the period in which Europe had enjoyed steady growth, high employment and low inflation was over.
These words have become more pertinent two years later with the landslide election of Donald Trump to a second term as US president on a promise of erecting trade barriers to the entire world.
The implications for Germany are profound.
The Zeitenwende compels Germany to make lasting investments in its military and lasting investments in an energy infrastructure to replace the cheap Siberian gas. It involves adjusting to a world in which markets for German goods in China and the US are shrinking rather than expanding.
In other words, this isn't a temporary crisis like the pandemic or the financial crisis of 2008 in which the state can steady the ship with a short, sharp injection of cash.
Adapting to the Zeitenwende necessarily entails making a choice. If you are not prepared to cut costs in the welfare system, you will have to raise public debt levels in the long term, with all the potential risks that that entails.
Scholz surely knows that, but he isn’t being honest about it. He also knows though that, a century after the hyperinflation that ravaged the Weimar Republic, Germans’ reaction to an increasingly insecure world is to cling to stable public finances like a life raft in a storm.
A poll published last year found that more people would actually favour tightening the current debt rules than relaxing them.
So, his answer is to fudge things. Which isn’t a terrible strategy as it puts his opponents under pressure to either weaken their opposition to taking on new debt, or to tell voters that they are going to have to work for longer.
CDU leader Friedrich Merz’s reply to Scholz in the Bundestag was relatively light on substance. Other than a promise to abolish the Bürgergeld dole system, he steered clear of discussing how Germany can support Ukraine, modernise its army and rebuild its energy infrastructure while balancing the books.
Instead, he tried to make out that the economy's problems were all homemade. He mainly resorted to cliches about "rolling up his sleeves" and “getting the economy back on its feet” by cutting corporate tax levels of slashing through red tape like the Supply Chain Act, a regulation that is as unwieldy as its name would suggest (Lieferkettensorgfaltspflichtengesetz).
As for the shift in the world towards greater protectionism, Merz thinks Germany needs a "deal maker" ala Trump. To much laughter from his own faction, he dismissed Scholz as a “lightweight” whom the incoming US president would “hang out to dry.”
He has promised to meet Trump with “an upright back” and get “a good agreement, which Trump would call a deal.” At the same time, he isn’t even prepared to publicly support imposing counter-tariffs should the US start a trade war.
An election soon after Christmas? It is the season of miracles.