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11 October 2023

The left’s slide in Germany is a warning for Labour

In power, Olaf Scholz’s coalition offers no answers for a country that has lost its competitive edge in the world. Keir Starmer should take note.

By Wolfgang Münchau

The dramatic loss of support for Olaf Scholz and his three-party coalition in two important state elections in Germany last Sunday was shocking in its scale. In Bavaria, the three coalition parties together only got just above 25 per cent of the vote. Scholz’s SPD ended up with barely over 8 per cent in that state. The liberal FDP did not even meet the threshold for representation in the state parliament. After only two years in power in Berlin, the coalition appears tired, out of ideas. They are already at the juncture where Britain’s Conservatives have found themselves after 13 years in office.

It all started so well in 2021. I have rarely seen a new German government come to office with so much hope. Their coalition agreement written in late 2021 was a much-admired political to-do list. But it was also a fair-weather construct, built for the pre-war period. Events intruded.

[See also: Germany’s centrist parties are fuelling extremism]

Scholz was quick to declare a change of era after Russia’s invasion of Ukraine, but apart from a one-off investment budget for the Bundeswehr, not much has changed to deserve that grand claim. The rise and decline of the German coalition should serve as a cautionary tale for the centre-left in other countries, especially in the UK: winning the next election is the easy part. Success or failure will not depend on your manifesto but on how you deal with encroaching events and shocks.

Political cycles in both Germany and the UK used to be long. For 39 years, from 1982 to 2021, Germany had just three chancellors. The UK had 18 years under the Tories from 1979, then 13 under Labour, then another 13 years of Conservative rule. I wouldn’t count on those long political cycles to persist.

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Italy entered short-cycle politics at the beginning of this century, right after it joined the euro. None of Italy’s governments has ever come up with a coherent plan to run the economy. Italian voters have reacted by kicking out incumbent after incumbent. 

Germany’s big failures of the past two decades have been over-reliance on old technologies, an energy policy that made it over-dependent on Russia, and its lack of digital investment.

The big unresolved issue in UK politics is the aftermath of Brexit. Keir Starmer does not want to rejoin the single market, but he wants to align UK policy with that of the EU. I do not see how this can conceivably work.

Brexit is to the UK what nuclear power has been to Germany. Before the Ukraine war, Germany had been dependent on Russian gas delivered through pipelines – and had no plan B. The coalition’s catastrophic error was to persist with its plans to phase out the country’s six remaining nuclear power plants, which in late 2021 were supplying Germany with 14 per cent of its electricity.

The coalition’s original big idea was to dramatically accelerate the roll-out of renewable energy sources over the next few years, and to use Russian gas to fill any gaps that arose – for example, in periods when there is no wind. Vladimir Putin’s invasion and the Western sanctions that followed made that strategy impossible to maintain.

The consequence is that Germany had to recommission old coal-fired power stations to keep the economy afloat. One of the most shocking environmental statistics of our time is that Germany has ten times the CO2 emissions of France.

When I met German corporate investors recently, I noted a degree of despair I have not previously come across. Some spoke openly about leaving the country. The mood today is much worse than in 2004 when Germany hit a recession, which prompted Gerhard Schröder to launch his big reform agenda. Cost-cutting was a viable option back then. Today there is no reform on the horizon. The problems are not about cost. The German economy has specialised in energy-intensive sectors. But without cheap gas, without nuclear energy, and with legally binding CO2 emissions targets, you have a problem that cannot be fixed by anything other than deep structural change.

I do not blame the coalition for Germany’s problem. The issues have built up over a long period. Coalitions need to make compromises. What determines success or failure is the totality of those compromises. The SPD got its minimum wage and higher welfare payments. The Greens got their nuclear phase out and the heat pumps that will now become obligatory for new buildings, starting next year. The FDP, tragically, favoured austerity as its big idea when they could have prioritised infrastructure modernisation. The combination of austerity and higher welfare payments meant less money for investment.

This is what voters are reacting to. What the coalition offers does not add up to a strategy for a country that has lost its competitive edge in the world. No policy can save the diesel car and the many companies that make components for it. But policy can open the way for new industries. The world has entered a new technological age. And Germans are slowly beginning to realise that they are not at the centre of this world any longer.

Scholz won the last election because his two opponents, the Greens and the CDU, self-destructed. The UK Labour Party, too, is on a trajectory towards an election victory helped to a large extent by the political meltdown of its two main opponents, the Conservatives and the SNP. The difficult part will come afterwards – when your old slogans no longer catch fire, and the old recipes cease to work.

[See also: The return of the two Germanys]

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This article appears in the 11 Oct 2023 issue of the New Statesman, War Without Limits