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7 December 2022

One year in, has Germany’s traffic-light coalition “dared more progress”?

Olaf Scholz’s progressive government has been strong domestically but mixed abroad.

By Jeremy Cliffe

BERLIN – One year ago, on 8 December 2021, Germany’s 16-year-long Merkel era ended and the age of the “Ampel” (traffic light) began. The new coalition government under Olaf Scholz of the Social Democrats (SPD) was so-named because the colours of its three parties (the SPD, Greens and liberal Free Democrats, or FDP) were red-green-yellow. The coalition recognised that Angela Merkel’s governments had been too reactive, providing stability but letting the federal republic fall behind on multiple fronts: its economic model, its social policy, its geopolitical stance, its energy sources and its technological and physical infrastructure. The essence of the traffic-light project was to make up for lost time, under the slogan mehr Fortschritt wagen or “dare more progress”.

As I and others noted at the time, its success in this endeavour would depend on how the three political traditions represented – social democracy, environmentalism and liberalism – interacted in power. Would the traffic light bring together the SPD’s understanding of social cohesion with the Greens’ strengths on the climate, democracy and civil rights, and the FDP’s appetite for a more open and innovative economy? Would it forge something greater than the sum of its parts? Or would Germany’s first entirely tripartite federal government collapse into lowest-common-denominator policies?  

That, of course, was before Russia’s full-scale invasion of Ukraine on 24 February, which presented the traffic-light coalition in Berlin with huge new challenges: harsher security and defence realities, hundreds of thousands of refugees arriving in Germany, and a massive, unanticipated gas and growth shock felt acutely in the country’s energy-intensive manufacturing economy. The war has raised the question: can the Ampel rise to the demands of the moment without losing sight of its long-term goals? Twelve months in, it is now possible to reach a preliminary assessment of its record: one that is broadly positive on domestic policies, but more mixed on foreign ones.

[See also: The ideologies of Europe’s far-right parties]

At home Scholz’s government has risen to meet the challenges of the war. About 1.2 million migrants, one million of them Ukrainian, arrived in Germany this year – more than at the peak of the migration crisis in 2015. Shelters and integration programmes have been reactivated and the country has largely coped with an influx that would have defeated almost any other in the West (the city of Berlin alone has taken in more Ukrainians than the whole of France). Thus far, too, the energy crunch is not proving the apocalypse for German industry some predicted; manufacturing output in Germany was higher in September 2022 than in September 2021. In October the government passed a €200bn package to shield households and firms from the worst of energy price rises. Government information programmes on saving energy have also helped; correcting for temperatures, German households are using about 20 per cent less gas than last year.

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Moreover, this has not come at the expense of long-term domestic policy priorities. Take, for example, the gulf between labour-market insiders (those in comfortable unionised or white-collar jobs) and outsiders (the ballooning low-wage sector) that has opened up in Germany in recent decades – a major focus for Scholz and his “respect” agenda. On this front the Ampel has hiked the minimum wage from €10.45 an hour to €12 an hour, benefiting 6.6 million workers (about 14 per cent of the German workforce). It has increased child benefit from €219 to €250 per child per month. And it has more than doubled housing benefit eligibility to encompass 1.4 million households. On 1 January 2023 the much-stigmatised “Hartz IV” system of unemployment benefits will be replaced with “citizen’s money”, a less judgemental and more generous substitute providing the jobless with better retraining options.

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Where Germany most conspicuously lagged its western European neighbours under Merkel was social policy. Here too the traffic-light coalition has dragged the country into the present. It has axed a Nazi-era law making it illegal for doctors to provide women with information on abortions; reformed laws on child custody to put same-sex parents on an equal footing to mixed-sex ones; it is decriminalising the recreational use of cannabis; and it is moving to reform tax laws that curb female participation in the labour market. It is currently preparing legislation encouraging immigrants to take German citizenship and integrate by shortening the waiting period before they become eligible for naturalisation and permitting dual citizenship. “In its first year alone the traffic-light government has brought in some of the core social policies of its coalition agreement,” notes Dominic Schwickert, director of the centre-left think tank Das Progressive Zentrum (DPZ).

When Robert Habeck, the Green economy and climate minister, took his post a year ago he expected to be overseeing the greening of the German economy. Yet Russia’s war in Ukraine and the shock to energy supplies has meant he has had to seek gas deals with Qatar, rush-build new terminals for Liquefied Natural Gas and extend the life of nuclear power plants to keep the lights on. These acts of carbon-intensive pragmatism have not done his public image much good. Yet at the same time he has also been putting Germany onto the long-term path towards cleaner energy. In July his so-called Easter Package, the biggest German energy reform in decades, cleared the Bundestag. Designed to raise the renewable share of Germany’s energy provision from 42 per cent now to 80 per cent in 2030, it reserves fully 2 per cent of Germany’s territory for wind power, simplifies planning processes for turbines and solar panels, expands subsidies for clean energy and invests in Germany’s power grid to link wind farms on its blustery northern coasts to factories in its hilly south.

There have been failures in the Ampel’s domestic policies, of course. A pledge of 400,000 new homes per year has so far been a flop; only 250,000 will be completed this year, a figure depressingly projected to fall to 200,000 in 2023. The main reasons – shortages of labour, pricier raw materials and onerous planning bureaucracy – also account for the slow progress on both Habeck’s vaunted wind turbines and the traffic light’s wider commitments to improved transport and digital infrastructure. Reforms to the German school system, which tends to lock in existing social inequalities, have been sluggish. But these omissions do not fundamentally detract from what is, on balance, a clearly positive domestic record of the first, unexpectedly demanding year of a four-year government.

[See also: The brutal methods of Russia’s Wagner Group]

Unfortunately it is not possible to say anything that clear about the traffic light’s foreign policies. The paradox here is that the government has gone farther than would have seemed even remotely possible before 24 February, but still not far enough considering the scale of Vladimir Putin’s war. Scholz declared a “Zeitenwende” (epochal shift) in a landmark speech to the Bundestag on 27 February. Since then his government has approved previously taboo exports of lethal weaponry (Ukrainian forces have been effusive in their praise for German arms like the Gepard anti-aircraft tank); created a €100bn military investment fund; announced that Germany would reach the Nato target of 2 per cent of GDP spent on defence; and forged a coalition of 14 EU states to build a European air defence system. In a speech in Prague on 29 August, less widely covered but arguably as significant as the Zeitenwende address, Scholz committed to a new wave of eastern EU enlargement and effectively offered France a radical new quid-pro-quo streamlining decision-making in this larger union, under which Paris would accept an end to national vetoes on EU foreign policy and Berlin would accept an end to those on EU tax policy.

And yet from the government of Europe’s biggest economy, one that was promising transformative leaps forward in its international role even before it was confronted by the biggest European security crisis in decades, the traffic light’s foreign policies have still been too timid. The air appears to be going out of the Zeitenwende. Not only will Germany not hit the 2 per cent defence spending target this year, but it will fall short in 2023 and 2024 too. New military procurement is progressing at a sluggish pace. A backlog of repairs and upgrades needed by its armed forces looks increasingly intractable. And hopes of new German leadership in Europe have not yet been fulfilled. Berlin’s €200 billion energy package was good domestic policy, but neighbours saw it as an unfair, unilateralist mega-subsidy for German industry. That arms exports like the Gepards have been so effective in Ukraine only makes it more regrettable that Germany has dragged its feet on sending other urgently needed arms (like battle tanks) and even blocked other EU states from exporting German-made weapons requested by Kyiv. Berlin’s relations with neighbours both to the west (France) and east (Poland and the Baltics) are more strained now than they were a year ago.   

The stubborn refusal to apply the lessons from Germany’s past over-reliance on Russia to its current relationship with China is also regrettable. In October Scholz defied the advice of six federal ministries to push through the sale of a stake in Hamburg’s port, Germany’s largest, to the Chinese state-backed firm Cosco. In November he visited Xi Jinping, the Chinese president, with a planeload of German executives; the readout of their meeting said he committed to “closer trade and economic cooperation with China” in defiance of his own government’s pledges to lessen Germany’s economic reliance on the autocratic superpower. “Coming from a low bar, Berlin’s efforts seem laudable,” says Liana Fix of the Council on Foreign Relations. “But the slow-motion approach, the lack of urgency and the narrow focus on Russia – disregarding the much greater China challenge – defies any initial hopes that this would become the grand geopolitical awakening of the sleeping German giant.”

Florian Ranft of the DPZ blames Berlin’s underlying assumptions: “Germany one year into the Ampel is cautiously trying to avoid shortcomings made in the past. Yet this is proving difficult to put into practice because the export-led German model of value creation depends on foreign manufacturers and consumers, especially those in China.” Such wise sentiments prevail in the Green-led foreign and economy ministries, with Annalena Baerbock, the foreign minister, publicly reminding Scholz before his visit to Beijing that the coalition agreement envisaged a “new China strategy” (that is: an end to Merkelian mercantilism) and Habeck’s staff producing a paper in November that advocated a clear pivot away from China in anticipation of the likely seizure of Taiwan, and associated geo-economic turmoil, by 2027.

There are enough positives in the traffic light’s foreign policy to make what might otherwise be a “poor” record merely “mixed”. But still, a reset is urgently needed in its second year: a realignment on China policy bringing the chancellery into line with the more far-sighted perspectives of the economy and foreign ministries; a fresh start in relations with France and Poland especially (with 2023 as a crucial year: the last window for big EU reform before the next European elections and institutional turnover in 2024); and a “Zeitenwende im Kopf” (a Zeitenwende “in the head” or shift in underlying attitudes) towards the leadership responsibilities of a country of Germany’s weight and European centrality. 

[See also: What is the Macron Doctrine?]

One year after Scholz succeeded Merkel, the mood here in Germany might best be described as “anxious”. Relations between its three governing parties are starting to fray: between the SPD and the Greens on China, and between the FDP (hammered in recent state elections, so feeling fragile) and the Greens on transport policies such as autobahn expansion. Polling puts the three Ampel parties collectively on 44 per cent, short of a putative Bundestag majority and down from their joint 52 per cent at the 2021 election. German businesses are also going into 2023 in a downbeat mood: the need to reduce energy use next year will be even greater (it will be harder for the country to fill its gas stores with Russian supplies limited from the off) and most of the easier efficiency savings have already been made. The country’s forecast economic growth is lower than that of any major economy but Britain.  

And yet the pessimism can go too far. Germans can be a gloomy bunch at the best of times, temperamentally prone to seeing the glass (or gas store) half empty rather than half full. As a general rule of thumb, the country is rarely in as bad a shape as its most hand-wringing commentators claim. Indeed, some of its foreign-policy failings are products precisely of this habit of underestimating Germany’s size and strength. One way to see the past year is as one of overdue reckonings; of reckonings not inherently unhelpful to a federal government whose very raison d’être was to stir the sleepy giant of the Merkel era from its complacent slumber.

Therein lies the spirit in which the traffic-light coalition should go into its second year: as a government that not only makes a virtue of its internal ideological diversity but also makes a virtue of the turmoil through which it must now lead Europe’s biggest economy. “Never let a good crisis go to waste,” as Winston Churchill once put it. Schwickert, of the DPZ, argues for three main shifts: better communication with the German people, a renewed sense of unity and common purpose between the governing parties, and ensuring that day-to-day crisis management does not eclipse big-picture reform. “It’s about prioritising those measures that count towards long-term, transformative goals,” he argues. So: greater openness with the public about the country’s difficult spot, combined with renewed vim and ambition in overhauling the country’s energy, economic, social and geopolitical models. There is a constructive middle ground to be claimed between German angst and German complacency, and now is the time to claim it.  

[See also: Germany must abandon the debt brake to make up for the lost Angela Merkel years]