Germany is at a serious political crossroads. Only in recent days, Chancellor Olaf Scholz dismissed Finance Minister Christian Lindner and announced a vote of confidence in the government in the Bundestag. De facto, this means the collapse of the coalition and early elections. Fish rots from the head, and the German government rots from the economy. – The economy is a very important determinant of this crisis. The coalition has been very difficult from the beginning, a three-party coalition, which is unusual for Germany, says Dr. Konrad Popławski from the Center for Eastern Studies in an interview with Next.gazeta.pl. Let us recall that Olaf Scholz's government was formed by the Social Democratic Party of Germany (SPD), the Alliance 90/Greens grouping and the Free Democratic Party.
Germany's economic crisis. “Almost Impossible to Govern”
Germany has been stuck in economic stagnation for 5 years, has almost the lowest public investment rate in the EU, and is also a leader in support for war-ravaged Ukraine. “Traditionally, Germany is also an important source of demand for other EU countries – their poor economic situation translates into reduced demand for the production of economic partners, which we now see in Europe. At the same time, the production potential of this country is unrivaled on the continent, Germany has been recording surpluses for many years trade at the level of 5-6 percent of GDP,” writes Michał Możdżeń, lecturer at the University of Economics in Krakow and specialist of the Polish Economic Network, in a comment for Next.gazeta.pl.
– In the case of the economic crisis and the problems that Germany is facing, the demands of individual parties are already completely scaled and the differences are sharper. If the economic situation were much better, the economy would blur the differences. If there was more money in the budget, it could also be allocated to various programs. However, when the economic situation is terrible, there is a feeling that Germany is facing huge structural problems. The government is quite inert because the parties are constantly blocking each other, and in addition, the compromise solutions have been questioned by the Constitutional Tribunal. Governing is becoming almost impossible, an OSW analyst explains in an interview with us.
A clash of ideas for economic reconstruction. “Germany really needs investment”
Each of the coalition partners also has a different idea for how to overcome the economic crisis, which in turn deepens the political crisis. The dismissed Minister of Finance, Christian Lindner, became a symbol of this. “He became known as a real fiscal hawk, opposed to any actions that would make it difficult to balance the budget and quickly reduce the public debt to GDP ratio. This was an attitude that was very difficult to reconcile with the economic challenges facing this country internally and in Europe as a whole, where Germany plays a leading role. role” – Michał Możdżeń describes him.
– The Liberals, currently the least popular of the ruling parties, want their commitment to be maintained so that the budget brake in the German constitution is maintained. This does not make it possible to increase debt limits in more bold investments, which, between God and the truth, Germany desperately needs – Dr. Konrad Popławski tells us. – Merkel's times were times of great investment negligence. Large funds have been channelized in the energy transformation, and other areas have been greatly neglected, e.g. road, railway, river infrastructure, ports – he mentions.
The Greens, in turn, would like to loosen this policy and add more money. This attitude is closer to Michał Możdżeń, who believes that this is how Germany should look for a way out of the crisis. “There is no reason to stick to fiscal orthodoxy, and given the scale of needs, this is a highly counterproductive action,” he writes in a commentary. – The elections are very close and expelling the liberals from the coalition allows SPD to show itself as a responsible party that may not be able to push through everything, but at least it will strive to announce certain demands and create the impression that after a good election campaign and a better coalition it will be in will be able to implement them – adds Dr. Konrad Popławski.
Volkswagen is the “nail in the coffin”. The Germans will not forgive this
In the background of these events there is a crisis in the automotive industry, which makes Germany's problems even worse. Volkswagen, which was the pride of this country, for the first time in its history may close factories in Germany and lay off thousands of workers due to poor financial results. BWM also has its problems. The automotive company's profit margin fell in the third quarter of this year to its lowest level in over four years. – This takes away a lot of the Germans' self-confidence. Automotive pride was the flagship of the German economy. This generated such a sense of agency and strength in Europe – says Dr. Konrad Popławski.
However, this key industry for Germany cannot cope with the revolution that the automotive industry is experiencing. – The Chinese or Americans are much more advanced. Germany does not have key competences in this segment. Their key competence is the ability to produce internal combustion engines, which are useless in the case of electromobility – says an OSW analyst.
– Society is starting to wonder whether this is good policy. The government is even more censored. People are worried about their future. Foreign factories were to complement the German ones. Meanwhile, Volkswagen still has a lot of factories in China, and it is starting to close its German ones. This is a blow to the social contract on globalization. German workers may feel cheated because they were supposed to benefit from it, but instead became victims. This may be the nail in the coffin, predicts Dr. Konrad Popławski.