The in principle provisional agreement between CDU-CSU and SPD to form a large coalition in order to govern Germany which has been settled before the last weekend is a first step. SPD, during a meeting which will occur January 21st has still to approve it. Already, during the last days, conflicting voices expressed themselves inside the party. If, at the end, green light is given, a deeper negotiation which could last during some more weeks will occur and, maybe, permit to form a government and put an end to the longest political crisis Germany has known since the war. Yet, the expected political solution is not so far from the one French people have chosen. Edouard Philippe government isn’t also a large coalition one?
German voters, last autumn, have expressed their discontent, which have resulted with historically low scores for the major political formations and a rise of extremist parties, notably, the AFD. It is really in that point that lies the German paradox because the brilliant economic achievements of the country are making envious all its European partners, among them, in the first position France where our neighbor successes are, all the day long, praised and quoted as an example. Trade surplus will be once more above 200 billion euro in 2017 when French deficit overpasses 60 billion, full employment is near with an unemployment rate under 5% of active population, State budget carries a surplus and public debt, year after year, decreases. Yet, voters are not satisfied. Is it because they less and less attach value to economic issues or is it because we are wrong about the German successes?
What is obvious is that nobody, in Germany, grants the State to the industrial and commercial successes of the country because they are the consequences of its corporate culture and at the center of the country social model. Company managers, in general, have made their entire career in it and it is extremely rare to have a former top civil servant running a DAX 30 company, the equivalent of the French CAC 40. Employees have an important position in the boards of the companies which have more than 2000 salaried. They would never have approved hazardous foreign acquisitions financed by debt or costly de-localizations regarding employment. The low unemployment rate results first from Germany demographic situation with one of the lowest birthrate in Europe. The method used for its calculation has also taken advantage from the reforms adopted in 2003 under the Schroeder government whose purpose was to put back to work Eastern Germans. Ten years after the unification, unemployment rate in the Eastern provinces was still above 15%. The creation of the mini-jobs and the drastic reduction of the rights offered to unemployed people had an immediate impact on statistics but the political consequences on SPD were heavy. Votes in favor of it regressed from 38% during the 2002 general elections to near 20% during the last one. SPD didn’t anymore govern the country and was only participating in two large coalition lead by CDU-CSU or, as between 2009 and 2013, staying in the opposition.
Regarding the results on public expenditures, they didn’t arouse any enthusiasm from the voters. They are, for a large part, the consequence of the demographic situation of the country. When there are fewer children, it means lower education expenses. None of the two major political parties is proposing a policy in favor of families with higher benefits and the taking in charge of crèche costs as an example. That forces many women to accept part-time jobs, which, once more, is not without consequence on the unemployment rate. At last the weak international involvement of the country generates much lower military expenditures than in France or in the United Kingdom. In that context, to come back to a balanced budget is easier. On the opposite, Germany didn’t take advantage of that situation to invest in infrastructure projects as the difficulties occurred with the construction of an alternative and modern airport in Berlin which is more than five years late, show it.
So, it is not surprising that the German good economic results did not really convince voters because on one hand they didn’t come from public action and on the other hand some produced disappointing results. The current project between the two major political groups will be submitted for approval to SPD leaders next Sunday. It includes social measures, reforms for the eurozone and a turnaround about environment with the abandon of the 2020 target for CO2 emissions. Keeping it would have lead to the closure of several coal-fired power stations and it is impossible for political reasons in the current context. Yet, the calculation method Germany obtained was favorable because the chosen basis year by Brussels was 1990 and included heavily polluting plants and power stations located in Eastern Germany which would have been closed in any case. So the target for 2020 was not very difficult to reach.
The other aspect of the German paradox is that the political group which got the highest increase of votes is the one which is the most euro-sceptic. But Germany has known more than all the other members how to take advantage of Europe through the allowances received after 1990 and thanks to the admittance of the former communist countries. These ones have been integrated in the supply chain of the German industry which has permitted to it to reduce its costs and to keep most of the value-added inside the country. A top of that, no European head of government has known better than Angela Merkel how to dictate in Brussels rules which will be in favor of German enterprises. The adoption of softer emission rules for high-range vehicles is a good example as the freeze of the carbon quotas market through the obstruction of any reduction of the obviously excessive allocations, in order to protect German coal-fired power stations.
The toughest issue in the current discussions between CDU-CSU and SPD, if they restart after this week-end SPD convention, will be precisely about the European project but not at all about the aspects which have motivated the AFD success, as border controls or migrants. The discussion will be focused on the reform of the eurozone with more financing tools to prevent any new crisis, including the creation of a European Monetary Fund and credits allocated to investment programs. These proposals are consistent with these which have been recently formulated by France. Asked by the SPD, that part of the government program of a possible large coalition government is strongly opposed by the conservative aisle of the CDU-CSU. To be sure that the commitments will be honored, SPD will even demand to appoint the minister of Finance because it will be him who will negociate the reforms with Brussels. But it is highly unlikely that CDU and even more CSU easily accept that the successor of Wolfgang Schaübble, known for his intransigence, will be a social-democrat. If the negotiation failed, and it could be about that symbolic issue, the political crisis in Germany would become deeper and would lead to new elections, postponing by several months the appointment of a government. The liability, for that unprecedented situation, would be attributed to disagreements about Europe. The German paradox would then have reached a new dimension.