Germany’s new coalition government: Entering a new political era

Two and a half months after the 2021 federal elections Germany has a new government. By signing the coalition treaty on Tuesday, 7th December, the negotiations between the Social Democrats (SPD), the Greens (Alliance 90/The Greens), and the Liberals (FDP) were formally concluded. Following two special digital party conventions by SPD and FDP and a general members’ referendum among the Green party members all three parties had given “green light” to the coalition agreement paving the way for the first-ever “traffic-light” coalition on federal level. On Wednesday, 8th December, Olaf Scholz (SPD) was elected and sworn in as new Chancellor by the Bundestag together with his cabi­net ministers marking the end of the 16-year long Merkel era.

Scholz’ new minister cabinet

With the new coalition government taking office the cards are being reshuffled on Germany’s politi­cal landscape. After the Greens and the FDP did not take much time to announce their personnel for the next legislative period, the Social Democrats only finalized the distribution of their seven cabi­net posts in the beginning of the week. As expected, Scholz installed some long-term allies for the SPD’s government posts like his powerful and well-connected right-hand man Wolfgang Schmidt as Chief of the Chancellery and Hubertus Heil as Minister of Labour. The Social Democrats also man­aged to secure themselves the powerful Ministries of Defence and the Interior. The appointment of ministers also held some surprises. Probably the most striking one was the announcement of SPD health politician and epidemiologist Karl Lauterbach as new Federal Minister of Health and current­ly most important crisis manager. Lauterbach had become a popular public figure during the coro­na pandemic regularly appearing as corona expert on TV and in the media and demanding stricter health protection measures. He will now play a key role in determining how well Germany masters the pandemic, which will also be a yardstick for Chancellor Scholz.

Not only the Social Democrats struggled with the allocation of ministerial posts. The announcement of the Greens’ five cabinet posts was preceded by fierce internal battles between the party’s more leftist “fundamentalist” wing and the more centrist “realist” wing, in which the “realists” around the co-party leaders Annalena Baerbock and Robert Habeck could prevail. As it was clear quite early, Habeck will lead the newly established Super-Ministry for Economic Affairs and Climate and will also serve as Vice-Chancellor. His newly designed ministry is regarded as the key department for the transformation of the German economy towards climate neutrality, however disputes with FDP leader and future Minister of Finance Christian Lindner (FDP) over financial investments and public spending are to be expected. From the beginning Lindner had expressed its claim on the Finance Ministry, as it is of central importance due to its financial veto power over other departments. As new Finance Minister Lindner will not only keep a watchful eye on a stable budget and follow a strict fiscal policy but he will also play a key role in Germany’s European and foreign policy as he will be in charge of European economic and monetary policy.

With former chancellor candidate Annalena Baerbock Germany will have the first female foreign minister. Baerbock wants to put a strong focus on a “climate foreign policy” as announced in the coalition treaty and drive climate policy on international level, especially in the framework of Ger­many’s G7 presidency starting next year. Furthermore, Baerbock announced a tougher line against China and Russia. While in the past Chancellor Merkel has largely determined foreign policy herself and put trade interests first when dealing with China, it has to be seen whether Baerbock will have more leeway under Chancellor Scholz than her predecessor Heiko Maas (SPD) had under Merkel.

As a downside for the Greens, the Ministry of Transport goes to the FDP, causing concerns and dis­appointments among the party as they fear that their plans for a climate-friendly and ecological turn in transport policy will be watered down by the liberal coalition partner. Indeed, the newly sworn in Minister for Transport Volker Wissing has already warned against additional burdens for drivers of diesel vehicles and presented himself as a spokesperson for the car industry. Also quite noteworthy, in the course of the restructuring of the federal ministries Wissing managed to bundle important digital affairs portfolios in his new Ministry for Transport and Digital Affairs which were formerly in the area of responsibility of the Federal Chancellery and the Ministry for Economic Affairs. This means that the Liberals will be in charge of the second huge transformation task by the Federal Government, the digitization of the country.

Roadmap for the next legislative term

Source: Sandro Halank, Wikimedia Commons, CC BY-SA 4.0

In line with previous German coalitions, the three parties negotiated a relatively detailed roadmap for the next four years. Although according to insiders the negotiations were concluded swiftly in a positive working atmosphere with few leaks and almost no public arguments, the three parties still had to resolve a number of crunch points, including climate change, the constitutional debt ceiling, taxation, and welfare policy. Con­trary to political observers’ expectations of a red-green alliance confront­ing the Liberals, the negotiation dynamics saw the Social Democrats tak­ing more of a moderating role between the free market-orientated plans of the Liberals and calls for far-reaching climate action by the Greens and showing more understanding and goodwill to the positions of the Liberals.

The 178-page coalition treaty titled “Dare more progress“ sets a clear focus on climate protection, digitization and sustainability. Climate protection is serving as the overall theme touching upon all other policy fields, as the Greens are determined to prevent any failure to meet climate targets from being blamed on them alone. With the Green “super minister” Habeck combining the portfolios economic affairs, climate and energy in one powerful ministry the coalition partners want to achieve climate neutrality until 2045 at the latest by further developing the climate protection law, acceler­ate the expansion of renewable energies and a coal exit “ideally” until 2030.

In terms of fiscal policy, the FDP clearly left its mark in the text of the agreement: There will be no higher taxes and the debt brake is to be effective again from 2023. Following controversial debates, the coalition partners agreed on a mix of public investment and incentives for private investment to finance the ambitious climate protection, education, infrastructure and digitization targets. To generate new state revenues environmentally and climate damaging expenditures and subsidies shall be reduced.

Germany’s deficits in the digital transformation are also given high priority by the coalition partners with plans to accelerate Germany’s lagging digitalization process. A breakthrough in the sluggish fiber network rollout and the latest mobile communications standard for everyone shall be achieved. The long-planned digitization of the administration should be further pushed and in the future, every federal law shall be subjected to a digitization check.

In terms of foreign policy, concerns by many observers fearing that a center-left government could draw back from NATO nuclear sharing and the two percent goal were somewhat allayed by the coalition treaty. It portrays a quite realistic approach towards foreign and security policy, as the new government will continue to support nuclear sharing and, albeit not making a clear commitment to the two percent goal, plans to spend three percent of the GDP on Germany‘s international activities including defense. When it comes to the transatlantic partnership the coalition partners will like­ly continue Germany’s centrist foreign policy. While the treaty states the aim to increase Europe‘s strategic sovereignty, this shall be done in close cooperation with the states that share Europe’s democratic values. The transatlantic partnership will remain a central pillar of Germany’s interna­tional action and an important partner in stabilizing the rule-based international order and counter­ing authoritarian developments.

Overall, the coalition treaty reflects a liberal and progressive basic attitude with innovations in mi­gration, integration and naturalization policy, the legalization of cannabis, a liberalization of abortion law, improvements in adoption law or lowering the general voting age to 16.

Germany’s new progressive path?

The coalition partners’ political roadmap sets out ambitious goals for the next four years and has the potential to put Germany on a much more progressive path, however it remains doubtful whether the parties will be able to execute their vision. Holding the first three-party coalition together will not be an easy task and many policy experts wonder how the coalition really plans to pay for their an­nounced plans to modernize Germany. Tensions due to fundamental ideological disparities especial­ly between Greens and Liberals have already become visible throughout the coalition negotiations but could be overcome by the common will to form a government and the pragmatic understanding by the party leaderships.

However, in the implementation of the aspired policies, the coalition is expected to face significant conflicts not only due to ideological differences but also overlapping political responsibilities based on the structure of the new ministries. Moreover, the new government takes its seat in a time in which the country is being hit especially hard by the pandemic with infection rates being higher than ever, an uncoordinated and weak pandemic management and lower vaccination rates compared to other Western industrialized countries. Germany’s current pandemic struggle in connection with a potential overload of the health system will most probably be the first litmus test for the newly sworn in government.

What can be stated with certainty is that the new German coalition government will usher a new political era and represent a new political style, that has the opportunity to set new impulses after years of grand coalitions led by Angela Merkel that were rather marked by administering politics than shaping them. This new alliance of partners bringing together different political perspectives, interests and stakes at a table will likely provide for more conflict and debate, but it could also be a chance to tackle complex challenges like the Covid pandemic, climate change and digital transfor­mation.