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Thursday, December 2, 2021

Olaf Scholz brings the wind of change to Germany

The winner of the German September general election reached an alliance agreement, which marked the political direction of the largest economy in Europe. 16 years after the alliance led by the Christian Democratic Party under Angela Merkel (Angela Merkel) took place. Variety. It marks a change in pace: the alliance agreement shows that the SPD, the Greens, and the liberal FDP have goals higher than their lowest common denominator.

The three parties share common values ​​in two important areas. One is social liberalism, manifested in a series of commitments, from a looser drug policy to easier access to citizenship. The other is a firm commitment to more public and private investments in decarbonization and the digital economy.

If the upcoming “Traffic Light Alliance” realizes its ambitions, it can inject a much-needed vitality into decision-making in Germany and Europe and meet the green and digital priorities adopted by the European Union and most of its countries. Member states. But successful joint negotiations cannot guarantee easy cohabitation in the office.

On the surface, the investment needed to restructure the German economy may be stifled by the commitment to maintain constitutional borrowing limits and not increase the overall tax burden. These are the requirements of the FDP, whose leader Christian Lindner will serve as the Minister of Finance. The other two parties have obtained social spending commitments, which has further taken up financial resources.

But it is clear that a consensus has been reached to make it easier for the government to borrow and invest, including special funds outside the main budget, to provide more resources for the National Investment Bank, and to re-evaluate the technical calculations of fiscal rules.

Flexibility can also be expected at the European level. With Olaf Scholz of the Social Democratic Party from the Ministry of Finance as the head of the traffic light government, he brought the EU’s most difficult economic and financial reform experience. The agreement envisages an EU-wide deposit guarantee reinsurance plan and is open to the reform of the EU Stability and Growth Agreement, “to strengthen its effectiveness in the face of the challenges of the times.”

The advantage of Germany’s lengthy alliance negotiations is that most of the difficult negotiations have now been completed. But it remains to be seen how many people will survive the office challenges, especially the shocking fourth wave of Covid-19 infections and deaths that swept the country.

There is a real incompatibility among voters of the three parties, especially the Liberal Democratic Party and the other two parties. Ingenious ways to circumvent the spirit of fiscal rules may alienate liberal voters. Green and free foreign policy ideas can be seen in a project that has a sharper tone for Russia, China and the rule of law than other European countries have learned from Berlin under Merkel. But in reality, they will face resistance from the Social Democratic Party, which is after all part of the outgoing government. Inevitably, some voters will feel betrayed.

When both domestic and EU-level challenges require the willingness to promote change, Merkel’s political longevity and style often drag her back. The election showed that her CDU party was exhausted from long-term governance; it could benefit from the opposing spell. If the renewal promise provided by the plan is true, then German politics, the national economy, and Europe may all benefit.

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