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29 September 2021

How a left-liberal German coalition could become a Petri dish for progressivism

As party negotiations begin in Berlin, Olaf Scholz seeks to form a "social, ecological, liberal" traffic-light government.

By Jeremy Cliffe

In March, I wrote in these pages that “the spectre of a left-led ‘traffic-light’ government is rising in Germany”. The term refers to a coalition of the centre-left Social Democrats (SPD), the Greens and the conservative-liberal Free Democrats (FDP), so-called as the parties’ colours are red-green-yellow. I cited the success of one such coalition that had recently won a resounding re-election in the state of Rhineland-Palatinate, a wine-growing corner of western Germany on the French border. This unusual marriage of three distinct political-philosophical traditions, I argued, might come to constitute Germany’s next federal government.

It was a fairly outlandish claim at the time. Polling put the Christian Democratic Union (CDU) and Christian Social Union (CSU), Angela Merkel’s centre-right political alliance, on 32 per cent, the SPD on 16 per cent and the three prospective parties of a traffic-light government short of a majority. Yet half year later, in the aftermath of the federal election on 26 September at which the SPD, Greens and FDP all made gains and the SPD narrowly came first, a traffic-light government is the most likely outcome. That would make Olaf Scholz, finance minister and formerly mayor of Hamburg, Merkel’s successor as chancellor.

Two other coalitions are also possible. One is a “Jamaica” coalition of the CDU/CSU, FDP and Greens (so called as the parties’ colours match the country’s flag). The other is a “grand coalition” of the SPD and CDU/CSU. The parties are discussing their options ahead of potentially months of coalition negotiations. Cannily, the smaller two parties have agreed to talk together before approaching either of the larger two. If the Greens and FDP can form a common front it will turn the talks into an auction between the SPD, seeking to bring them into a traffic-light coalition, and the CDU/CSU, seeking a Jamaica one.

Building a traffic-light government would not be easy. The SPD and Greens, both under moderate leaderships, have plenty of common ground. But the FDP sits on the right of the European liberal family, more George Osborne than Paddy Ashdown. It is aligned with the centre left on some social policy (legalising cannabis and naturalising migrants, for example) but is far apart on fiscal policy (it wants tax cuts and steely fiscal rectitude, they want more progressive taxation and investment).

Yet a traffic-light coalition is the likeliest outcome. Coming first in a German election does not guarantee the chancellery, but it helps. It also helps that Scholz is far more popular than the gaffe-prone CDU leader Armin Laschet, and that unlike Laschet he has a relatively united party behind him. If anyone in the SPD can lure the FDP into a centre-left coalition, then it is Scholz.

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Moreover, there may be under-appreciated common ground. On election night I spoke at an event hosted by the traffic-light state government of Rhineland-Palatinate and by the liberal-left think tank Das Progressive Zentrum. Figures close to and within all three of the SPD, Greens and FDP were present and upbeat about the possibility of a deal: “For progressives one question is now important: who won the election?” asserted Hubertus Heil, a bastion of the SPD’s own liberal wing: “The SPD won, the Greens won, and the FDP got a solid result too.”

The outlines of a traffic-light coalition are emerging. The economist Jens Suedekum argues that a sovereign wealth fund could boost investment in green infrastructure within the constraints of Germany’s constitutional “debt brake”, which is designed to limit the federal government’s structural borrowing (and is sacred to the FDP). He suggests that the left might drop its demand for a wealth tax in exchange for a more progressive inheritance tax. The liberals might curb their demand for tax cuts in return for generous allowances for companies investing in digital and green industries. Insiders envisage a Scholz cabinet in which the FDP would hold the finance ministry and the Greens would secure the foreign ministry and a powerful new economy-environment ministry leading the green investment push.

Combine such compromises with common priorities, such as greater investment in the digital state and liberalising social reforms, and it is not too hard to imagine a traffic-light coalition delivering the modernising government that Germany so urgently needs. While certain German red lines on the EU would persist, such as opposition to the necessary integration of the eurozone, such a government could be good for France and the wider union too.

On 27 September, Scholz announced his intention to form a traffic-light government that he said would be “social, ecological, liberal”. In doing so he pointed to the central challenge: to bring those three political traditions together.

But he also captured what would make such a project an exciting prospect. The societal, demographic, environmental and geopolitical crises facing advanced democracies demand elements of all three: a social democratic commitment to cohesion and resilience, a green transformation to contain the climate emergency and a liberal spirit of reform and innovation. If Scholz is able to draw these together into an alliance, that traffic-light coalition could do more than just move Germany forward. It could become a Petri dish for the kind of pluralistic, progressive governments that are needed across the West.

[See also: In charts: The legacy of Angela Merkel’s chancellorship]

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This article appears in the 29 Sep 2021 issue of the New Statesman, Spirit of the Age