Thursday, November 7, 2024

The end of Germany’s dysfunctional coalition offers Europe new hope

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Barely 12 hours after Donald Trump’s victory in the US presidential election, his America First policy claimed its first European victim with the collapse of Germany’s coalition government.

The three coalition partners — Olaf Scholz’s Social Democrats, the Greens of economy minister Robert Habeck and the liberal Free Democrats of finance minister Christian Lindner — have been at loggerheads for months over policy to the point of paralysis. On Wednesday, they convened to try to resolve their differences over a €9bn hole in the 2025 budget.

The dispute over the fiscal shortfall — a tiny sum set against planned expenditure of more than €2tn — was in reality a proxy for a much wider, and ultimately unbridgeable, ideological divide. Scholz and Habeck have long wanted Lindner to agree to relax Germany’s strict debt rules so the government can spend more on defence, support for Ukraine and reviving the economy. Scholz argued on Wednesday that with Trump’s return to the White House, Russia’s war against Ukraine was precisely the kind of emergency that allows the rules to be relaxed. Lindner refused and was fired, spelling the end of the coalition.

It was a rare display of decisiveness by Scholz who, with some justification, rounded on his finance minister, accusing him of acting irresponsibly and in bad faith. It is easy to blame Lindner and the FDP. They have instigated many of the coalition’s bust-ups for their own political gain. The FDP’s poll rating has sunk below the 5 per cent threshold for representation in the Bundestag and Lindner was looking for a reason to bail out. His timing is terrible, given how much is at stake for Germany’s prosperity and security at this juncture. But the bickering and indecision afflicting the government had become untenable.

Europe is badly prepared for a Trump presidency. Its strategy has been to hope for the best rather than plan for the worst. It has lacked a sense of urgency in arming Ukraine and bolstering its own security. Germany’s political shambles is not the only reason. France is in political disarray and President Emmanuel Macron has suffered a dramatic loss of authority. The big European economies are in the doldrums and budgets are under severe strain. But the EU is invariably stuck when there is a power vacuum in Berlin. Germany is Europe’s indispensable nation. The EU cannot revive its economy or take on more responsibility for its own security unless Berlin deploys its fiscal firepower to make it happen, whether at home or through the EU, in the form of more joint borrowing.

Scholz was at his most impressive when he declared a Zeitenwende, or watershed moment, for his country in the wake of Vladimir Putin’s full-scale invasion of Ukraine in early 2022. He promised a long-term commitment to turn Germany into a military power, “with the strength of our own” to keep tyrants such as Putin in check. But his ambition quickly ran out of steam. And while his government rapidly weaned German industry off Russian fossil fuels, the economy is suffering the consequences and is struggling to find a new growth model.

Many Germans feel their country needs new direction and ideas. The Social Democrats and Greens have haemorrhaged popular support. Scholz on Wednesday appealed to the opposition Christian Democrats to find common ground on the urgent need for measures to support the economy and strengthen defence. Germany must not follow America, where “ideology has made co-operation across political boundaries almost impossible”, he said. Scholz is right, not least because Germany’s political system is designed for coalition government. However, the CDU is likely to see that as an attempt to play for time and enhance Scholz’s legacy, when they would prefer fresh elections even sooner than March.

The so-called red-yellow-green or “traffic light” coalition was seriously on the blink and could not continue. But it is regrettable that the EU’s most powerful member will be consumed by an election campaign just as Trump returns to office threatening punitive tariffs against German and European imports, a withdrawal of the US security umbrella and an unfair peace deal for Ukraine. A divided Germany has a lot to lose.

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