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Germany after the traffic light coalition: The quest for a strong and stable government

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Everyone wants a strong government. German business leaders are pushing for swift action, and EU leaders, who rely on German leadership, are eager for a stable and effective Germany. German President Frank-Walter Steinmeier calls for “stable majorities” and “a government that can act,” appealing for “reason and responsibility” and stressing the need to “avoid tactics and confrontation.”

Initially, all eyes are on the SPD and CDU. Yesterday’s meeting between Chancellor Olaf Scholz and Friedrich Merz, who is expected to become the next chancellor, was highly anticipated. “We’ll take a look at the laws you bring to parliament,” Merz replied, with one condition: “Don’t postpone the vote of confidence until January.”

Even if Scholz holds onto his position, the SPD seems ready to share power with the conservative and powerful CDU. According to Handelsblatt, an internal CDU document analyzing the collapse of the traffic light coalition reveals that the SPD has been planning for some time to remove the FDP and Christian Lindner from the government.

This brings us back to German business leaders and the German economy.

Saxony’s CDU premier, Michael Kretschmer, welcomes the early end of the traffic light coalition in Berlin. “If the traffic light coalition had continued for another ten months, the economic situation in the state would have worsened,” Kretschmer states.

The CDU leader warns that companies are moving away, and notes that local authorities are already facing a deficit of 15 billion euros. “Every day a new government is in formation is an opportunity and a gain for Germany,” he asserts.

In representing the desires of German capital, the CDU voices the concerns of the business community. Following the coalition’s collapse, economic leaders are pressing for new elections as soon as possible.

The business leaders demand ‘geopolitical action’: The U.S., Ukraine, Middle East… No time to waste

“Every day with this government is a lost day,” says Dirk Jandura, President of the Federation of German Foreign Trade (BGA), calling for new elections as soon as possible.

Christoph Ahlhaus, Federal Managing Director of the BVMW (German Association of Small and Medium-Sized Enterprises), echoes this urgency, stating that a vote of confidence in January is “too late” and that the current Chancellor “no longer inspires confidence.”

Prominent industry associations, including the German Association of the Automotive Industry (VDA), German Chemical Industry Association (VCI), and German Electrical and Electronic Manufacturers’ Association (ZVEI), also urge a speedy re-election.

VDA President Hildegard Müller highlights the pressing need for change, pointing to the wars in Ukraine and the Middle East, Donald Trump’s election victory, a new European Commission, unresolved trade issues with China, and Germany’s weakened position as an investment hub. According to Müller, these challenges demand a federal government with “maximum capacity for action and determination” as soon as possible.

Peter Adrian, President of the Association of German Chambers of Industry and Commerce (DIHK), adds that Germany’s economy requires an economic policy that promotes investment and growth. He therefore hopes for only a brief transitional period.

Tim-Oliver Müller, Managing Director of the Federation of the German Construction Industry, expresses hope that the crisis can be resolved by “all democratic parties assuming responsibility for state policy.”

Meanwhile, Marcel Fratzscher, President of the German Institute for Economic Research (DIW), asserts that the war in Ukraine demanded priority shifts and a radical course correction in economic and financial policy, which he believes the current government failed to undertake.

Business leaders are also voicing their impatience. Matthias Zachert, CEO of chemicals group Lanxess, tells Handelsblatt, “I can’t understand why the Chancellor doesn’t want to call new elections before March. The Chancellor must pave the way for new elections immediately. Every day is crucial. We can’t afford to stall until March.”

Reform expectations: Less bureaucracy, lower taxes, and a stronger energy transition

The Mittelstand—a term for companies regarded as the backbone of the German economy—is also voicing its demands. Often described as “like SMEs but not like SMEs”, these family-owned enterprises dominate global export markets in specific sectors and are essential to Germany’s economic success.

Paul Niederstein, chairman of Coatinc (Germany’s oldest family-owned business in galvanizing), supports a faster reorganization of the federal government. “I think new elections in March are too late. Scholz is not showing consistency by dragging his feet until March,” he argues.

Michael Otto, owner of the Otto Group retail company, stresses “speed” in forming a new government. Echoing sentiments similar to Trump’s, he states, “We need a government that can act very quickly,” advocating for elections before Trump potentially takes office.

Martin Herrenknecht, founder of the tunnel-boring machine manufacturer Herrenknecht, outlines key reform expectations: reduced bureaucracy, tax relief for low-wage workers, control over the expanding welfare state, regulated migration policies, digitalization, and investments in infrastructure and education.

Northern Europe calls for ‘strong German leadership’

Martin Herrenknecht, founder of Herrenknecht, also advocates for increased investment in defense. Viewing recent events in the US as a wake-up call for Europe, he emphasizes, “To protect our democracies against autocrats and despots, we must build up our own defense.” In Germany, the call for militarization of the economy and society is gaining momentum.

Across sectors, the push for less red tape is clear, with tax cuts for SMEs and reform high on the agenda. Business leaders are calling for strong, decisive leadership to address these pressing issues.

However, some express concerns about the state of the German workforce. Frank Natus, chairman of VTU in Trier, criticized Chancellor Scholz, stating that Germany faces high taxes, the highest energy costs in Europe, extensive bureaucracy, and a skilled labor shortage. “We have become too lazy, lethargic, and complacent in Germany, and that must change urgently,” Natus asserts.

Paul Niederstein, head of Coatinc, echoed similar concerns, remarking that high sickness rates reflect a workforce he described as “too spoiled and overconfident.”

EU leaders are watching these developments closely. At the recent European Political Community (EPC) summit in Budapest, Finnish Prime Minister Petteri Orpo expressed hope for speedy elections in Germany, stressing that Europe needs a strong German government. His Belgian, Swedish, and Danish counterparts—Alexander De Croo, Ulf Kristersson, and Mette Frederiksen—share this view.

Is an AfD policy possible without the AfD?

German business leaders seem to be calling for policies that resemble those of the Alternative for Germany (AfD). Ironically, the “spirit” of this party, once considered outside the mainstream, is now being invoked in economic discourse, with significant overlap in economic platforms.

It is often forgotten these days that the AfD was founded in 2013 by a group of ‘free market economists’ who were fundamentally critical of European integration, and angry at the EU’s bailout of Greece and other heavily indebted eurozone countries.

According to AfD deputy leader and budget committee spokesman Peter Böhringer(*), the party wants a ‘free market economy with a social perspective’, largely based on the 1948 model of Ludwig Erhard, the Christian Democrat politician who laid the foundations for Germany’s post-war reconstruction. The relationship between this economic policy, also known as ordoliberalism, Nazism and post-war federal Germany deserves a much longer analysis. But it recognises the limits of the ‘German miracle’: The AfD is committed to limiting the role of the state and advocates cutting taxes, including those that are seen as a ‘means of redistributing wealth’. Its anti-redistribution rhetoric about ‘the share of welfare that goes to immigrants’ also appeals to lower-income Germans and Germans with a migrant background.

Any state-run economy will sooner or later end up in misallocation and corruption,’ says the party’s economic programme, which advocates cutting state subsidies and abolishing the tax cap, as well as wealth and inheritance taxes.

Companies would make a profit and there would be enough money to help the poor: This is the cornerstone of the AfD’s ‘social market economy’.

However, the AfD does not yet have an ‘industrial policy’. More precisely, it still turns up its nose at the partnership between the state and the private sector for re-industrialisation that is now being widely discussed in the West. It therefore polls well in eastern Germany, where the need for an ‘energy turnaround’ is high.

But it is clear that the march to ‘power’ will not be both this and that, or neither this nor that. The Germany of exporters needs a strong, ‘less bureaucratic’ government, but at the same time a debt-free and ‘re-industrialised’ Germany. If the CDU-SPD ‘grand coalition’ does not work, an AfD-ised CDU or a CDU-ised AfD is the perfect solution. It is not soothsaying to expect a ‘recalibration’ of the two parties in the coming year.


(*) Peter Böhringer is a member of the libertarian Friedrich August von Hayek Foundation. In every party of the global ‘populist’ wave, without exception, you can find traces of libertarian organisations and ideas that say ‘this is not real capitalism’.

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The era of the ‘right-wing majority’ in the European Parliament

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Under Ursula von der Leyen’s second presidency, the European Commission will abandon its previous ‘cordon sanitaire’ policy towards the ‘far right’.

Leyen’s new Commission will include two members from the ‘far right’. Raffaele Fitto of Fratelli d’Italia (Brothers of Italy – FdI), the party of Italian Prime Minister Giorgia Meloni, and Olivér Várhelyi, who is close to Fidesz, the party of Hungarian Prime Minister Viktor Orbán.

Fratelli d’Italia is part of the European Conservatives and Reformists (ECR) group in the EP, while Fidesz is part of the Patriots for Europe (PfE) group, which also includes the French National Rally (RN) and the Austrian Freedom Party (FPÖ).

The conservative European People’s Party (EPP), led by German CSU politician Manfred Weber, has repeatedly cooperated with the ECR in the past legislature and explicitly reserves the right to do so in the future.

The cordon sanitaire against the right is practically non-existent

More recently, it has voted with the PfE and sometimes even with the Europe of Sovereign Nations (ESN), of which the German AfD is a member. The traditional border against the ‘extreme right’ (the so-called ‘security cordon’) is thus continuing to crumble.

The security cordon was systematically relaxed by the EPP in the last legislative period. As early as January 2022, the EPP made it possible for an MEP from the right-wing ECR to be elected as one of the vice-presidents of the EP.

A study by the Greens shows that the European Commission under Ursula von der Leyen has relied on MEPs from the ECR and even the more right-wing ID (Identity and Democracy) group in around 340 votes to secure a majority.

According to the study, these demands often included a reduction in the CO2 price for the car industry or the approval of subsidies for fossil fuels.

With the votes of the EPP, ECR and ID, the EPP also managed to block a motion in April 2024 proposing measures to prevent parliamentary staff from being harassed by MEPs.

So, one small step after another, the security cordon was broken.

Breaking point: European right united against Maduro

In September, one of the first votes of the newly elected EP attracted more attention. The resolution under discussion would have recognised Edmundo González, the defeated candidate in the presidential elections in Venezuela on 28 July 2024, as the real winner of the elections.

The resolution in favour of González was tabled jointly by the EPP and the ECR, in which the party of Italian Prime Minister Giorgia Meloni is the largest group.

The resolution was finally adopted with the votes of Orbán’s Fidez, Le Pen’s National Rally (RN) and PfE, which includes the FPÖ, and the ESN, which includes the AfD.

The ‘Venezuelan majority’ at work in the EP: EPP support for the AfD

The so-called ‘Venezuelan majority’ – the large voting majority of conservative and right-wing parties in the EP – has since come into play on several occasions.

This was the case in October, for example, when the European Parliament decided on the procedure for presenting and voting on future EU commissioners. Also in October, the EPP voted in favour of an AfD budget motion proposing the erection of extensive barriers at the EU’s external borders.

The EPP, ECR and PfE also voted to award this year’s European Parliament Sakharov Prize to González and right-wing Venezuelan opposition politician María Corina Machado.

Finally, last week the EPP joined with other MEPs on the right to amend a bill aimed at halting global deforestation.

Sparking outrage on the left, several rebel MEPs from the ECR, PfE, ESN and the liberal Renew group backed the EPP on key amendments.

European Commission President Ursula von der Leyen was elected in July on the basis of an alliance between the EPP, Liberals, Socialists and Greens.

In its second term, the European Commission is abandoning its previous ‘cordon sanitaire’ policy against the ‘far right’.

Leyen’s new Commission will include two members from the ‘far right’. Raffaele Fitto of Fratelli d’Italia (Brothers of Italy – FdI), the party of Italian Prime Minister Giorgia Meloni, and Olivér Várhelyi, who is close to Fidesz, the party of Hungarian Prime Minister Viktor Orbán.

Fratelli d’Italia is part of the European Conservatives and Reformists (ECR) group in the EP, while Fidesz is part of the Patriots for Europe (PfE) group, which also includes the French National Rally (RN) and the Austrian Freedom Party (FPÖ).

The conservative European People’s Party (EPP), led by German CSU politician Manfred Weber, has repeatedly cooperated with the ECR in the past legislature and explicitly reserves the right to do so in the future.

New Commissioners from the right

Raffaele Fitto, a member of Giorgia Meloni’s FdI party, is known as one of Meloni’s closest friends and will be appointed by Leyen as one of the vice-presidents of the EU Commission ‘responsible for cohesion and reforms’.

Hungary, on the other hand, has appointed former Enlargement Commissioner Olivér Várhelyi as a commissioner in Brussels, with future responsibility for health. Várhelyi is very close to Prime Minister Orbán’s Fidesz party.

There is strong protest against Fitto and Várhelyi in the Socialist and Green parliamentary groups, which support the Leyen Commission. It is rumoured that both groups will not support the appointment of the two politicians.

The invisible architect of the right-wing alliance: Manfred Weber of the CSU

The row over future commissioners has come to a head in recent days.

EPP President Manfred Weber (CSU), who is seen as the main architect of his group’s alliance with the ECR and the EPP, could theoretically get two right-wing commissioners approved with a “Venezuelan majority”.

However, if CDU or CSU politicians in the EP vote with the AfD on a key decision, this could be seen as an unwelcome signal shortly before the early German elections.

But as former Italian prime ministers Romano Prodi and Mario Monti said on Tuesday, pressure is growing for the EU to act ‘as one’ at a time when it faces ‘major challenges both in the East and in the West’.

We have a responsibility to make sure that something changes after this election… The majority will very often include the ECR,” German EPP MEP Peter Liese of the CSU also told reporters on Monday.

Liese said he had no “firewall” against the ECR and claimed that Fitto’s senior position had been negotiated as part of an agreement between the main political families in the European Council at the beginning of the summer.

Continued support for Ukraine in return for right-wing MEPs

On Wednesday (20 November), however, the leaders of the European Parliament’s political groups, meeting in Brussels, reached an agreement.

According to this, Fitto and Várhelyi will be allowed to take up the positions in the European Commission that Leyen has envisaged for them, and the Socialists will agree to this.

In return, the EPP promises to cooperate only with ‘pro-Ukrainian’ parties that support the EU and the rule of law.

This means that the old ‘cordon sanitaire’, i.e. the border against the ‘extreme right’, has been replaced primarily by foreign policy conditions.

According to the EPP’s interpretation, there are no longer any obstacles to cooperation with the ECR.

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Turmoil in the SPD: Pistorius vs. Scholz

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Pressure is mounting on German Chancellor Olaf Scholz to relinquish leadership of his party, the Social Democrats (SPD), ahead of the upcoming snap elections. This move is seen as a potential lifeline for the party, currently polling in third place, to regain electoral momentum.

The SPD leadership has thus far supported Scholz’s bid for a second term in the federal elections, now rescheduled for 23 February 2025 following the collapse of the three-party coalition on 6 November. However, internal dissent is growing.

In two heated party meetings last week, SPD MPs deliberated over whether Defence Minister Boris Pistorius should replace Scholz as the party’s candidate. According to Der Spiegel and POLITICO, one meeting included the conservative wing of the SPD, while the other involved its left wing. Both groups reportedly had significant support for replacing Scholz with Pistorius.

Calls for Scholz to step aside reached a crescendo on Monday, with prominent SPD politicians from North Rhine-Westphalia, Germany’s most populous state, leading the charge.

Pistorius’ voices rise within the party

Dirk Wiese and Wiebke Esdar stated: “The focus is on finding the best political line-up for this election. We hear a lot of praise for Boris Pistorius. It is clear that the final decision on the chancellor candidacy will rest with the party committees, as it should.”

Markus Töns, a long-time SPD member, echoed this sentiment in Stern: “The chancellor has done a good job in difficult circumstances, but the coalition’s end signals a need for a fresh start. Boris Pistorius would make this easier than Olaf Scholz.”

Former SPD leader Sigmar Gabriel was even more critical. Writing on X (formerly Twitter), Gabriel warned of “growing resistance” within the SPD to Scholz’s leadership. “The SPD leadership’s only response is appeasement and loyalty pledges. What we need is bold political leadership. Without it, the SPD risks falling below 15 percent,” he cautioned.

Scholz confident of ‘support from the leadership’

The SPD leadership had planned to finalize the chancellor candidacy decision at its party conference on 30 November. However, the timeline may accelerate to quell the escalating debate.

Speaking from the G20 Summit in Brazil, Scholz dismissed questions about his candidacy, expressing confidence in party support. “The SPD and I aim to win this election together,” he told Die Welt. Secretary-General Lars Klingbeil reinforced this stance, stating on ARD television: “We are committed to continuing with Olaf Scholz—there’s no wavering.”

Chancellor returns without stopping in Mexico

Despite these reassurances, Scholz abruptly canceled his planned trip to Mexico, returning to Berlin after the G20 Summit amid rumors of party infighting. While the SPD leadership held a conference call on Tuesday to discuss the campaign strategy, no decisions were reached.

Recent opinion polls paint a bleak picture for both Scholz and the SPD. The party is polling at 16 percent, far behind the CDU and the far-right AfD, marking a steep decline of 10 points since the 2021 elections.

Yet, Boris Pistorius remains Germany’s most popular politician, consistently outpacing CDU leader Friedrich Merz in approval ratings. This has fueled hopes within the SPD that Pistorius could revitalize their electoral prospects.

Pistorius’ rising profile is not without controversy. Known for his hawkish stance on military issues, he advocates for making the German military “fit for war” and has pushed for increased defense spending to meet NATO’s 2 percent of GDP target. Critics argue that these positions clash with the SPD’s traditional skepticism toward military intervention and ties with Moscow.

Nonetheless, many within the SPD believe Pistorius offers the best chance to avoid a crushing defeat in February’s elections. Pistorius has championed investments to rebuild the Bundeswehr after decades of neglect and launched initiatives to recruit for Germany’s depleted armed forces. His restructuring of the army earlier this year emphasized regional defense over external missions.

Internationally, Pistorius’ assertive approach has earned respect from Western allies, positioning him as a strong contender for the chancellorship despite his public denials. “We already have a candidate, and he is the sitting chancellor,” Pistorius recently told German state television.

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Greek workers hold general strike over high cost of living

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Workers across Greece are participating in a nationwide general strike today (20 November), encompassing all sectors of the country. The strike is being held under the slogans “Money for Wages, Education, and Health” and “Out of the War Slaughterhouses.”

This strike follows weeks of preparation, marked by massive protests and sector-wide actions involving doctors, construction workers, dockers, maritime workers, metal workers, telecom workers, hotel staff, and distribution employees. These coordinated efforts underscore the growing discontent among Greece’s working class.

In a statement, the Militant Front of All Workers (PAME), the organization leading the strike, declared: “For the strike to succeed, there is no alternative but to fight everywhere. If we don’t fight for our interests, we will gain nothing. The great strike struggles of construction workers, railway workers, delivery workers, hotel staff, miners in the shipbuilding region, dockers, shipyard workers, health workers, and teachers are showing the way, providing hope and optimism for more sectors to join in.”

The strike is expected to disrupt government offices, schools, hospitals, and public transportation, including trains and island ferries.

Yannis Panagopoulos, president of the leading private sector union GSEE, emphasized the growing challenges faced by workers: “The cost of living is too high, and our salaries have hit rock bottom, while the high cost of housing has left young people in a tragic situation.”

Like other labor groups, GSEE accused the government of “refusing to take meaningful measures to provide decent living conditions for workers.”

Currently, low-income Greeks are forced to subsist on a minimum wage of less than 900 euros per month, even as retail, telecom, and energy costs remain among the highest in Europe. The left-wing opposition often criticizes this disparity, claiming the less privileged are forced to pay “British prices on Bulgarian salaries.”

Conservative Prime Minister Kyriakos Mitsotakis recently pledged to raise the minimum wage to 950 euros. However, critics argue that this measure is insufficient in a society where the wealth gap continues to widen, exacerbated by rising housing costs.

Despite these domestic struggles, international credit rating agencies have lauded the Mitsotakis administration for its fiscal reforms. These reforms have not only ensured Greece met financial targets and returned to investment-grade status, but also enabled the country to outperform other EU member states in terms of economic growth.

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